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Gratuity Calculator

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Gratuity Amount

28,846

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What Is Gratuity?

The sum of money that a corporation pays its employee at the end of their service is referred to as gratuity. The gratuity sum, however, is only granted to employees who have worked for the business for five years or longer. The 1972 Payment of Gratuity Act controls it.

If an employee becomes handicapped in an accident or due to a disease, they are eligible to receive their gratuity before the five-year mark. The amount for gratuity calculation in India is primarily based on your most recent income and the number of years you have worked for the company.

What is a Gratuity Calculator?

When you leave a company as an employee, whether through retirement or another reason, you are paid a gratuity. Every employee is not given a gratuity. Some guidelines for paying the gratuity sum are outlined in the Payment of Gratuity Act, 1972. Only after working for an organisation for five years or more are you entitled for gratuities.

According to the regulations regarding gratuities, if an employee is hurt and becomes incapacitated as a result of an accident or disease, they may get a gratuity payment before completing five years of employment. The amount of gratuity you are entitled to depends on your final salary and the total number of years you worked for that organisation.
So let's say you intend to quit your job or are eager for retirement. In that situation, you can estimate how much you'll get in tip by using the gratuity calculator. Based on the Gratuity formula for the gratuity amount calculation, the gratuity amount would be determined using the gratuity calculator online.

(15 * your last drawn salary * tenure of working) / 26.

Benefits of Using the Vakilsearch Gratuity Calculator

  • A simple to use general tool, the VakilSearch Gratuity Calculator asks for the basic income and the number of years of employment

  • After 5 or more years of continuous service, online gratuity calculator gives you an estimate of the gratuity you might get

  • The online gratuity calculator provides you with the figures in a matter of seconds

  • Gratuity calculator online aids in your financial planning by ensuring that the gratuity is invested wisely for the greatest possible returns

  • To determine the gratuity amount, you could use a gratuity calculator virtually anywhere, also at home.

Gratuity Calculation Formula for Central Government Employees and Private Employees in India

The gratuity amount can be determined with the gratuity calculation formula,

Gratuity (G) = N * B * 15/26

G = Gratuity Amount

N = The number of completed years in the organization

B = As of the last month's basic salary (plus dearness allowance, any commissions received from sales)

Eg 1: For Employees covered under the Act:

No. of years an employee works in an organisation = 15 years
His last drawn basic + dearness allowance = ₹30,000
Therefor Gratuity = 15 x 30,000 x 15/26 = ₹2,59,615.38

Eg 2: For Employees not covered under the Gratuity Act:

The employees would still receive the gratuity amount even if the organisation was not covered by the Gratuity Act. However, the days will be increased from 26 to 30.

The Gratuity calculation formula is:

Gratuity = (15 × last drawn salary × working tenure)/30

If you have worked for a company for seven years, the organisation is not covered under the Gratuity Act. And your basic salary was ₹35,000.

Gratuity Amount = (15 × 35,000 × 7) / 30 = 1,22,500.

Gratuity Amount Calculations for 5 Years, 10 Years, 11 Years, 12 Years, 15 Years

Gratuity Calculation in India involves several factors, such as your basic salary, the number of years served, and the current gratuity rules. The gratuity calculator considers these factors to provide an estimate of your gratuity amount. It is important to clearly understand how gratuity is calculated and to negotiate a good compensation package based on your years of service. For more information about how gratuity is calculated for different years of service, check out the calculations provided by the online gratuity calculator.

What is the Gratuity Calculation for 5 Years?

Assuming, Ms. Suveera is an employee at ABC Pvt. Ltd. for five years and three months. Her last payslip amounts to INR 1,00,000. The total amount of gratuity she would receive is

  • N = 5 Years

  • B = INR 1,00,000

Gratuity Amount Calculation = 1,00,000*5*(15/26) = INR 2.88 Lakhs

What is the Gratuity Calculation for 10 Years?

Assuming, Mr.Harish is an employee at ABC Pvt. Ltd. for ten years and three months. His last payslip amounts to INR 1,00,000. The total amount of gratuity he would receive is

  • N = 10 Years

  • B = INR 1,00,000

Gratuity Amount Calculation = 1,00,000*10*(15/26) = INR 5.76 Lakhs

What is the Gratuity Calculation for 11 Years?

Assuming, Mr.Jagan is an employee at ABC Pvt. Ltd. for eleven years and three months. His last payslip amounts to INR 1,00,000. The total amount of gratuity he would receive is

  • N = 11 Years

  • B = INR 1,00,000

Gratuity Amount Calculation = 1,00,000*11*(15/26) = INR 6.34Lakhs

What is the Gratuity Calculation for 12 Years?

Assuming, Mr.Pravein is an employee at ABC Pvt. Ltd. for twelve years and three months. His last payslip amounts to INR 1,00,000. The total amount of gratuity he would receive is

  • N = 12 Years

  • B = INR 1,00,000

Gratuity Amount Calculation = 1,00,000*12*(15/26) = INR 6.92 Lakhs

What is the Gratuity Calculation for 15 Years?

Assuming, Ms.Krithika is an employee at ABC Pvt. Ltd. for fifteen years and three months. Her last payslip amounts to INR 1,00,000. The total amount of gratuity she would receive is

  • N = 15 Years

  • B = INR 1,00,000

Gratuity Amount Calculation = 1,00,000*15*(15/26) = INR 8.65 Lakhs

Gratuity Eligibility in India for Employees

You must fulfill the requirements listed below in order to have Gratuity Eligibility in India

  • Superannuation should be offered to you.

  • You ought to have completed your career by now (retired).

  • 5 years of continuous employment with the organisation should have prompted your resignation.

  • If your death occurs, your gratuity will be given to your nominee or, if you become disabled due to illness or an accident, to you.

Organisations Eligible for Gratuity

According to the Payment of Gratuity Act of 1972, the gratuity eligibilty in India is employers with ten or more employees. The following organisations are protected by the act:

  • Every business, whether it be a factory, mine, oilfield, plantation, port, or railroad

  • Every business or establishment within the meaning of the law where there were at least 10 employees on any given day during the previous year (as State Govt specify)

  • Every business or establishment within the meaning of the law where there were at least 10 employees on any given day during the previous year (as Central Govt specify)

  • Any business or facility covered by the Gratuity Act with fewer than 10 employees after becoming qualified.

Gratuity Rules 2023 India

The Payment of Gratuity Act of 1972 gives employers the option of giving up their gratuity payments. The person has completed at least five years of employment with the organisation. There are several gratuity regulations. Let's examine each of the gratuity regulations individually.

The threshold for the maximum gratuity amount has been lifted from the previous limit of ₹10 lakhs to ₹20 lakhs in the most recent publication of the Government of India's interim budget for the year 2019. The PSU employees and those who are not protected by the Payment of Gratuity Act will benefit from this rule, which took effect on March 29, 2018.

Only for government employees is the maximum limit for gratuity increased; for non-government employees, the law remains the same, i.e; The gratuity sum can never exceed ₹10 lakhs. Ex-gratia is the term for any gratuity overage.

If there are more than six months in the final month of a person's employment year, the number is rounded up to the next number. A person would receive the gratuity of 16 years, for instance, if their service period was 15 years and 7 months. However, if it ends up being 15 years and 4 months, the employee will receive a 15-year gratuity.

Income Tax Exemption on Gratuity

As per the Income Tax Act, gratuity received by an employee is taxable as income under the head ‘Income from Salary’. Some of the tax exemptions available for gratuity is as follows :

  • The maximum exemption limit for gratuity is ₹20 lakhs

  • This limit was increased from ₹10 lakhs to ₹20 lakhs with effect from 29 March 2018.

The tax exemption is provided under Section 10(10) of the Income Tax Act, 1961. As per the section the following gratuity amount or exempt from income tax:

  • 15 days' salary (based on the last drawn salary) for each completed year of service, or part thereof in excess of six months

  • Any gratuity amount in excess of the above limit of ₹20 lakhs will be taxable as income under the head ‘Income from Salary’

Gratuity received by employees not covered under the Payment of Gratuity Act, 1972 includes:

  • Half month's average salary (based on the last ten months' average) for each completed year of service, or part thereof in excess of six months

  • Any gratuity amount in excess of the above limit of ₹20 lakhs will be taxable as income under the head ‘Income from Salary’.

What Is the Maximum Gratuity Limit in India?

The maximum gratuity limit in India is currently ₹20 lakhs, as per the Payment of Gratuity (Amendment) Act, 2018. This limit was increased from ₹10 lakhs to ₹20 lakhs with effect from 29 March 2018. This means that any amount of gratuity received by an employee up to ₹20 lakhs is exempt from tax subject to certain conditions and limits. Amount exceeding ₹20 lakhs will be considered as income from salary and stands liable for taxation.

Gratuity Percentage in India 2023

The Payment of Gratuity Act, 1972 governs the payment of gratuity to employees in India. As per the Act, gratuity is calculated as a percentage of the employee's last drawn salary and the length of their continuous service with the employer. The current gratuity percentage in India is 15 days of the employee's last drawn salary for each completed year of service or part thereof in excess of six months.

The gratuity amount calculation can be done using the following gratuity formula:

Gratuity = (Last drawn salary x 15 x number of years of service) / 26

Here, ‘last drawn salary’ refers to the basic salary plus dearness allowance and ‘number of years of service’ refers to the completed years of service with the employer.

Where Can One Invest the Lump Sum Gratuity Amount Received?

Here are some options where one can invest the lump sum gratuity amount received:

Fixed Deposits (FDs): One can invest in fixed deposits for a fixed tenure and earn a fixed rate of interest. FDs are a safe and secure investment option, and the returns are guaranteed.

Public Provident Fund (PPF): PPF is a long-term investment option, which offers tax benefits under section 80C of the Income Tax Act. The funding is secure and is supported by the Indian government.

Mutual Funds: Mutual funds, which are administered by qualified fund administrators, are available for investment. Depending on a person's risk tolerance, mutual funds provide a variety of financial choices, including stock funds, debt funds, and hybrid funds.

National Pension System (NPS): The Pension Fund Regulatory and Development Council oversees the NPS benefit plan (PFRDA). The returns are dependent on the success of the market, and it is a long-term investment choice.

Real Estate: One can invest in real estate, which is a long-term investment option. The investment can generate regular rental income and capital appreciation over the long term.

Stocks: Stocks that are traded on the stock market can be purchased for investment. Stock investing is a high-risk, high-reward strategy that calls for knowledge and study.

Gratuity Calculations in Case of Death of Employee

The maximum reward in the event of an employee's death will be limited at ₹20 lakh and would be depending on the length of service provided.

Example 1: A worker for XYZ Company has been there for 20 years. He is paid a monthly salary of ₹15,000/-. He had been given free housing for ₹10,000 and transportation worth ₹5,000 during this time. Therefore, his total gratuity would be ₹50000. This sum should be subject to a 30% tax, or ₹15,000.00.

Example 2: Someone has worked with XYZ company for ten years. He is paid a salary of ₹12,500 each month. During this time, he had been provided with free housing worth ₹2000 and free transportation worth ₹1000. Therefore, his total gratuities would be ₹30,000. This sum will be subject to a 30% tax, or ₹9000.

Types of Forms of Gratuity Act

Form NamePurpose
AForm of opening
BForm for change of establishment
cForm for the closure of the establishment
DForm for excluding husband from the family
EForm for withdrawal of notice for excluding husband from the family.
FForm of nomination
GForm for fresh nomination (with the help marriage)
HRemolding of nomination
IGratuity payment application
JGratuity payment application for the nominee
KGratuity payment application for legal heir
FMake nomination
GMake new/fresh nomination
HModify nomination
LIssued by the employer to employee stating date and amount of payment
MIssued by the employer to employee stating the reason for rejection
NApplication made to the labour commission by an employee
OIssued by the authority to appear for case hearing
PSummons issued by authority to be present for hearing
RIssued by the authority directing to make gratuity payment
SNotice for payment of gratuity
TApplication for recovery of gratuity
UAbstract of the Act and Rules

How to Use the VakilSearch Gratuity Calculator?

Utilising the Vakilsearch's Online Gratuity Calculator, complete the following steps to determine your gratuity:

  • By using a slider, you must input the base pay and, if necessary, the dearness allowance

  • The number of years spent working for the company is then entered

  • The online gratuity calculator would quickly determine the total amount of gratuity due to you

  • By adjusting the input sliders, you can recalculate the gratuity whenever you like

  • Moving the sliders will immediately calculate the gratuity.

What are the Taxation Rules for Gratuity?

The category of employee that must receive the tip will determine how the gratuity amount is taxed.

Any gratuity that a government employee (whether they work for the federal, state, or municipal government) receives is exempt from income tax return.

Every additional qualified non-public worker whose employer is protected by the payment of Gratuity Act. In this case, the lowest of the 3 amounts will not be subject to income tax:

  • The actual amount of gratuity received

  • ₹20 lakh

  • The eligible gratuity.

Eg: You received a gratuity of ₹12 lakh from your company.

According to the preceding example's gratuity calculation in India, you are qualified for a gratuity sum of ₹2,59,615 as a result. The maximum amount exempt from taxes has been established by the government at ₹20 lakh. The least expensive of the three amounts, ₹2,59,615, is tax-free. The remaining sum of ₹9,40,385 is subject to taxation according to your income tax bracket.

***Please be aware that the maximum tax-free gratuity sum you may receive in your entire working career cannot exceed ₹20 lakh.

  • Usually, the business gets group insurance or deducts the gratuity from its budget

  • Contrary to the employee provident fund, which also includes the employee's contribution, the employer pays the gratuity sum

  • According to the Payment of Gratuity Act, 1972, a predetermined percentage of the wage is calculated and deposited in a gratuity account that would be due later

  • The perk serves as a superannuation benefit for departing employees.

  • All companies with more than ten employees are covered by the Act

  • A gratuity payment is made in the event of a resignation, retirement/superannuation, layoff or voluntary retirement, death, reduction, disability, or termination

  • In the event of death, the money will be paid to the employee's nominee.

New Gratuity Rules for Private Sector Employees

Employers must abide by several rules regarding gratuity payments. These rules regarding gratuity payments are explained below:

  • The first regulation regarding gratuities is that an organisation can only pay gratuities if it had 10 or more employees within the previous 12 months. However, it must still pay gratuities in accordance with the Gratuity Act if the number of employees is less than 10

  • An employee must have completed five consecutive years of service with the company to be qualified for a gratuity payment. However, in the event of an employee's death or disability, this regulation governing gratuities is not applicable

  • The regulations governing gratuity payments state that payments may be made in the event of an employee's retirement, death, resignation, termination of employment, disability as a result of illness or an accident, layoff due to retrenchment, or if the employee elects to participate in the Voluntary Retirement System (VRS)

  • Last but not least, gratuity payments in India are based on an employee's most recent take-home pay and the number of years they have worked for the company.

How Can Gratuity Calculator Help You?

According to the Payment of Gratuity Act of 1972, you are eligible to receive the stipulated gratuity amount

  • You're getting close to retirement age

  • You have continually worked for the same company for the past five years

  • There isn't another full-time employer for you.

In such cases, a gratuity calculator online in India is useful because –

  • It aids in determining the specific sum that is owed to you

  • You can avoid wasting money and other resources

  • It can be used from the convenience of your home

  • Your long-term financial planning is aided by it.

Why Vakilsearch for Gratuity Amount Calculation?

  • Our legal experts will guide you from end to end of this process

  • All the forms and the application will be filled out by experts, if any, and submitted on your behalf so that you don’t have to bear the stress yourself

  • The entire process is online and you can use the free Gratuity Calculator tool of Vakilsearch for calculating gratuity

  • Your work and data are safe and secure with us

  • Our support team is available to answer any questions you might have.

Gratuity Calculator FAQs

Gratuity is calculated using the formula based on an employee's last drawn salary and years of service.

The formula is Gratuity = (Last drawn salary) × (15/26) × (Number of years of service).

Yes, the gratuity amount is based on the last drawn salary and the length of service.

Yes, a minimum of five years of continuous service is required to be eligible for gratuity.

You need to complete a minimum of five years of continuous service to qualify for gratuity.

Cash gratuity refers to a monetary payment given to an employee as a token of appreciation for their service, typically upon retirement or resignation.

No, gratuity can generally be claimed only once, usually upon retirement, resignation, or other qualifying events.

Yes, there is a maximum limit on gratuity, which was Rs. 20 lakhs as of my last update.

No, gratuity is not deducted from salary; it is a separate payment made by the employer.

Investment decisions depend on individual financial goals. Consult a financial advisor for suitable options.

No, PF and gratuity are different. PF is a retirement savings scheme, while gratuity is a lump-sum payment.

Employers are generally obligated to pay gratuity if the employee meets the eligibility criteria.

Yes, there is a maximum limit, which was Rs. 20 lakhs as of my last update.

Employers are required to release gratuity within 30 days of it becoming payable.

Gratuity is an employer liability, so there could be challenges if the employer goes bankrupt.

No, the formula is for statutory gratuity. Ex gratia payments are calculated differently and are discretionary.

Yes, Our online gratuity calculator is free to use.

You can use the gratuity calculator online as many times as you want, without any limit or restrictions on the number of uses.

No, the gratuity calculator only calculates gratuity payment. It cannot be used to calculate ex gratia payment, which is typically a voluntary payment made by an employer.

Even if your employer files for bankruptcy, the gratuity sum would still be due. The amount of the gratuity cannot be suspended by a court order.

This is due to the new law's restriction that an employee's allowances cannot exceed 50% of their base pay. Employers must raise employees' basic salaries by 50% in order to comply with this rule.

A worker can only get a gratuity after five years of continuous employment with the same employer, according to Section 4(1) of the Payment of Gratuity Act of 1972.

Government and private sector employees both get gratuities, which are tax-free. After five years of full-time employment with the same employer, an employee is qualified for a gratuity.

By submitting the gratuity claim form I, you can withdraw your gratuity. To learn the exact steps to take, read this page. To figure out how much tip you should expect to receive, utilise a gratuity calculator. One element of a person's remuneration is the gratuity.

According to the Payment of Gratuity Act of 1972, the company must pay the employee's gratuity within 30 days of the date it becomes due. Employers who don't make the payment by the deadline are responsible for paying basic interest on the gratuity sum from the deadline to the payment date.

No, even if a company is not fiscally secure, it cannot decline to pay the gratuity. Every boss is required by the Payment of Gratuity Act of 1972 to give a tip to a worker after they have worked for five years nonstop. Employees can seek relief from the controlling body under the Payment of Gratuity Act if an organisation fails to pay the gratuity sum.

If a contract worker has worked for the company for five years in a row, they will receive a bonus upon reaching that milestone. The Payment of Gratuity Act, 1972, includes all workers, including contract employees, who have finished five years of continuous employment with the employer.

Yes, the maximum limit on the gratuity amount that an employee can receive is ₹20 lakhs, as per the Payment of Gratuity (Amendment) Act, 2018. This means that even if the calculated gratuity amount exceeds ₹20 lakhs, the maximum amount that can be paid as gratuity to an employee is ₹20 lakhs.

The gratuity amount becomes payable to an individual on any of the following events:

  • Retirement
  • Resignation
  • Superannuation
  • Death or disablement due to illness or accident
  • According to the Payment of Gratuity (Amendment) Act of 2018, the maximum gratuity is ₹20 lakhs.

    The Vakilsearch Gratuity Calculator is a useful tool that can help you estimate the amount of Gratuity you may be entitled to. However, it is important to note that the calculator is only an estimate, and the actual amount of Gratuity you receive may vary depending on a number of factors, such as the number of years of service, your last drawn salary, and the rules of your employer.

    If you want to get an accurate figure for the gratuity amount, you should consult with an attorney or a chartered accountant. They will be able to take into account all of the relevant factors and give you a more accurate estimate.

    You can nominate someone to receive your Gratuity in case of your death by filling out a gratuity nomination form. The form is usually available from your employer.

    The gratuity nomination form will ask you to provide the following information:

  • The name of the person you are nominating to receive your Gratuity.
  • The relationship of the nominee to you.
  • The nominee's address.
  • The nominee's PAN number.
  • Once you have filled out the form, you must submit it to your employer. Your employer will then keep the form safe and only release the Gratuity to the nominee in case of your death.

    Gratuity is offered to employees as a form of retirement benefit. It is a lump sum payment given to employees who have completed a certain number of years of service. The amount of Gratuity is calculated based on the employee's last drawn salary and the number of years of service. Employees receive gratuity to help them meet their financial needs after retirement. It can also be used to pay off debts or to start a new business.