1. What is Gratuity?

Gratuity is a lump sum payment made by an employer to an employee as a token of appreciation for the services rendered. In India, it is governed by the Payment of Gratuity Act, 1972 for eligible employees.

2. How Gratuity is Calculated?

The calculator uses the standard gratuity formula:

Where:

• \( \text{Salary} \) — Basic salary (INR)
• \( \text{DA} \) — Dearness Allowance (INR)
• \( \text{Years} \) — Years of service
• 15 — Represents 15 days wages for each completed year
• 26 — Represents number of working days in a month

Note: For employees covered under the Gratuity Act, the maximum gratuity amount is ₹20 lakhs.

3. Eligibility Criteria

Details: Employee must have completed at least 5 years of continuous service with the same employer to be eligible for gratuity payment.

4. Using the Calculator

Tips: Enter your basic salary, dearness allowance (if applicable), and total years of service. The calculator will compute your gratuity amount based on the standard formula.

5. Frequently Asked Questions (FAQ)

Q1: Is gratuity taxable?
A: Gratuity received during service is fully taxable. For retirement gratuity, government employees are fully exempt while others have exemption up to ₹20 lakhs.

Q2: What if I leave before 5 years?
A: You won't be eligible for gratuity unless it's due to death or disablement.

Q3: Is gratuity paid for part years of service?
A: For more than 6 months in the last year, it's rounded up to next full year. Less than 6 months is ignored.

Q4: Can employer pay more than calculated gratuity?
A: Yes, the Act specifies minimum amounts but employers can pay more as per company policy.

Q5: What about employees not covered under the Act?
A: They may still receive gratuity as per company policy, but the calculation may differ.