1. What is Gratuity?

Gratuity is a statutory benefit paid by employers to employees who have completed at least 5 years of continuous service. It's governed by the Payment of Gratuity Act, 1972 in India and is calculated based on last drawn salary and years of service.

2. How Does the Calculator Work?

The calculator uses the standard gratuity formula:

Where:

• Last Salary — Basic salary plus dearness allowance at the time of leaving
• 15 — Represents 15 days wage for each completed year
• 26 — Represents days in a month (for calculation purposes)
• Years of Service — Rounded to nearest full year (minimum 5 years)

Note: The maximum gratuity amount payable under the Act is ₹20 lakh (as of 2023).

3. Importance of Gratuity Calculation

Details: Gratuity serves as a financial reward for long-term service and helps employees in their post-retirement life. Accurate calculation ensures employees receive their rightful benefits.

4. Using the Calculator

Tips: Enter your last drawn basic salary plus dearness allowance in INR and total years of service (minimum 5 years). The calculator will compute your eligible gratuity amount.

5. Frequently Asked Questions (FAQ)

Q1: Who is eligible for gratuity?
A: Employees with 5+ years of continuous service in an organization covered under the Gratuity Act.

Q2: Is gratuity taxable?
A: Gratuity received by government employees is fully exempt. For others, the least of following is exempt: ₹20 lakh, actual gratuity received, or 15 days salary for each completed year.

Q3: Can gratuity be paid before 5 years?
A: Normally no, except in case of death or disablement of the employee.

Q4: How is salary defined for gratuity?
A: It includes basic salary plus dearness allowance but excludes other allowances and bonuses.

Q5: What if my organization isn't covered under the Act?
A: Many organizations still pay gratuity as part of their HR policy, though not legally mandated.