What is Gratuity
Gratuity is a retirement benefit paid to employees under the Payment of Gratuity Act, 1972. It's calculated based on last drawn salary and years of service.
Gratuity Calculator
Calculate gratuity amount as per Indian Gratuity Act
Gratuity payable
₹2,88,462
- Basic salary
- ₹50,000
- Salary for gratuity (basic + DA + commission)
- ₹50,000
- Total service
- 10 yr
- Divisor used
- 26
- Gratuity as per formula
- ₹2,88,462
- Statutory ceiling
- ₹20,00,000
- Gratuity payable
- ₹2,88,462
What this calculator does
Employees working in private companies that offer EPF benefits become eligible for gratuity after completing five years of continuous service. In certain cases, gratuity may be payable even before five years, such as when an employee suffers permanent disability due to an accident or illness. Gratuity payments are governed by the provisions of the Payment of Gratuity Act, 1972, and the payable amount is calculated based on the employee's last drawn salary and total years of service. WFYI offers a free gratuity calculator that helps you estimate the gratuity amount you may be entitled to receive. If you are eligible for gratuity, checking the estimated amount in advance allows you to understand your benefits clearly and plan your finances with better certainty.
How it is calculated
\text{Gratuity} = \frac{\text{Last Salary} \times 15 \times \text{Years of Service}}{26}Last Salary = Basic + DA (Dearness Allowance). For organizations not covered under Act, the denominator is 30 instead of 26.
Worked example
An employee has served an organisation for 5 years and their last drawn basic salary plus DA is ₹40,000
Gratuity = (40,000 × 15 × 5) / 26
₹1,15,384.62
- Eligible after completing 5 years of continuous service
- In case of death or disability, 5-year condition is waived
- If service includes 6+ months in final year, round up to full year
- Maximum gratuity capped at ₹20 lakh; excess treated as ex-gratia
- Formula uses 26 (working days) for Act-covered organizations, 30 for others
Tax and compliance notes
- Government employees: Entire gratuity is tax-exempt
- Private sector (Act-covered): Exempt up to ₹20 lakh or eligible amount, whichever is less
- Tax exemption calculated as minimum of: ₹20L, actual gratuity, or formula-based eligible amount
- Taxable portion added to income and taxed at slab rates
- Lifetime exemption limit of ₹20 lakh across all employments
How Can a Gratuity Calculator Help You?
Under the Payment of Gratuity Act, 1972, you may be eligible for gratuity if you are close to superannuation, you have completed 5 continuous years with the same organisation, and you are not employed full-time elsewhere. In such situations, an online gratuity calculator helps because:
- Shows exact gratuity amount. It shows the exact gratuity amount you may receive.
- Saves time. It saves time by avoiding manual calculations.
- Easy accessibility. It can be used easily from anywhere.
- Better planning. It supports better long-term financial planning.
How to Use WFYI's Gratuity Calculator?
Follow these simple steps to calculate your gratuity amount:
- Step 1: Keep details handy. Keep all essential details about your employment history handy.
- Step 2: Enter salary details. Enter your last drawn basic salary plus dearness allowance, and the gratuity amount will be calculated instantly.
- Visual breakdown. In addition to the numeric result, the calculator displays a visual breakdown that clearly compares your payable gratuity with the maximum gratuity limit.
Advantages of Using WFYI's Gratuity Calculator
WFYI provides simple and dependable financial tools to help users make informed decisions. The gratuity calculator is useful because:
- Secure data handling. Your data is handled securely and is not stored or misused.
- Easy to use. The calculator is easy to use and does not require technical expertise.
- Accurate results. The calculation follows the standard gratuity formula, ensuring accurate results.
- Instant results. It provides instant results without the need for manual calculations.
- Financial planning. It helps you plan long-term finances by giving clarity on your expected gratuity amount.
Taxation Rules for Gratuity
The tax treatment of gratuity depends on the type of employee and the amount received.
- Government employees. Gratuity received by government employees is fully exempt from income tax.
- Private-sector employees (covered under the Act). The least of the following three amounts is exempt from income tax: ₹20,00,000, the actual gratuity amount received, or the gratuity amount calculated as per eligibility under the Act.
- Overall exemption limit. The maximum tax-exempt gratuity an employee can claim during their entire professional career is capped at ₹20,00,000.
Current rates
Maximum Gratuity Limit
₹20,00,000
Source: As per Payment of Gratuity Act, 1972 (amended)
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