What is Gratuity?
Gratuity is a retirement benefit paid by employers to employees who have completed 5+ years of service.
Eligibility
- Minimum 5 years of continuous service
- Payable on resignation, retirement, or death
- Even superannuation and retrenchment qualify
Gratuity Calculation Formula
Gratuity = (Last Drawn Salary × 15 × Years of Service) ÷ 26
Where:
- Last Drawn Salary = Basic + DA
- 15 = Days of salary per year
- 26 = Working days per month
Calculate yours: Gratuity Calculator
Example Calculation
For an employee with:
- Basic + DA: ₹50,000
- Service: 10 years
Gratuity = (50,000 × 15 × 10) ÷ 26 = ₹2,88,461
Tax Exemption
Government Employees
- Entire gratuity is tax-free
Private Sector (Covered under Act)
- Exempt up to ₹20 lakh
- Least of: Actual gratuity, ₹20 lakh, or formula amount
Maximum Gratuity
Maximum gratuity limit: ₹20,00,000
Related Calculators
Tags
#Gratuity#Retirement#Tax#Benefits
