Gratuity Calculator

If you leave before completing 5 years of continuous service, you are not entitled to gratuity under the Payment of Gratuity Act. However, some companies have their own gratuity policies that may provide benefits even before 5 years. Check your employment contract for details.

For employees not covered under the Act, gratuity is calculated as half a month's salary for each completed year of service. The formula is: (Last drawn salary x 15 days x years of service) / 30. This generally results in a slightly lower amount than the Act calculation.

Yes, the maximum gratuity exempt from tax is 20,00,000. Any amount received above this threshold is taxable as per your income tax slab. The employer may pay more than 20,00,000, but the excess is taxable in your hands.

Yes, gratuity received upon resignation after 5 years of service is eligible for the same tax exemption under Section 10(10) up to ₹20,00,000. The treatment is identical to gratuity received at retirement. However, if you receive gratuity from multiple employers during your lifetime, the total exemption across all employers cannot exceed ₹20,00,000.

In the event of an employee's death or disablement, the gratuity is payable to the nominee or legal heir without the 5-year service condition. The amount is calculated based on the actual years of service, even if less than 5 years. Such gratuity payments are fully exempt from income tax without any upper limit under Section 10(10).

The gratuity formula divides by 26 (working days in a month) rather than 30 because the Payment of Gratuity Act considers 15 days of wages for each completed year of service, and a month is reckoned as 26 working days. So the calculation is: (Last drawn salary × 15 × Years of service) / 26. For employees not covered under the Act, the denominator is 30, which results in a slightly lower gratuity amount.

Yes, under Section 4(6) of the Payment of Gratuity Act, an employer can forfeit gratuity wholly or partially if the employee's services have been terminated due to misconduct involving theft, fraud, or violent acts. The maximum forfeiture is limited to the amount of damage or loss caused. For termination due to other offences involving moral turpitude, the gratuity can be forfeited entirely at the employer's discretion.

Contract labour and temporary employees are eligible for gratuity if they have completed 5 years of continuous service with the same employer, regardless of their employment type. The Payment of Gratuity Act applies to every factory, mine, oilfield, plantation, port, railway company, and shop or establishment employing 10 or more persons. Once covered, the Act continues to apply even if the employee count falls below 10.

Gratuity is calculated based on the last drawn salary (basic pay + dearness allowance) at the time of retirement or separation. Therefore, any salary hike in the final year increases the gratuity amount proportionally. However, the calculation uses the salary as on the date of leaving, not an average of the last few months. Employees planning retirement may benefit from a final-year salary revision as it directly impacts the gratuity payout.

If an employer becomes insolvent, gratuity is treated as a preferential payment under Section 327 of the Companies Act, meaning gratuity dues are paid before other unsecured debts. The employee should file a claim with the Official Liquidator or Insolvency Resolution Professional. Under the Payment of Gratuity Act, the employer must obtain a gratuity insurance from the Life Insurance Corporation to protect employees in case of insolvency.