Calculate Your Retirement Benefit | Tax-Free up to ₹20L
✓ Lump Sum Payment - One-time benefit at retirement/exit
✓ Tax-Free up to ₹20L - No tax on gratuity up to limit
✓ 5 Years Service - Minimum eligibility (except death/disability)
✓ Automatic Right - Legal entitlement for eligible employees
✓ Companies with 10+ employees | ✓ Better calculation (26 days)
ℹ️ Minimum 5 years continuous service required
Basic + DA (used for gratuity calculation)
Counted as: 8 Years (Rounded up)
₹2.77 L
Gratuity up to ₹20 lakh is completely tax-free
Gratuity is a lump sum amount paid by an employer to an employee in appreciation of services rendered. It's a retirement benefit covered under the Payment of Gratuity Act, 1972. Eligible after 5 years of continuous service (except death/disability cases).
Our calculator helps you determine exact gratuity amount based on last drawn salary, service years, company type (covered/non-covered), and reason for separation (retirement/resignation/death/disability). Get instant results with tax-free limit breakdown.
Example:
Basic: ₹40K, DA: ₹10K, Service: 10Y
= (50,000 × 15 × 10) / 26 = ₹2,88,462
Example:
Basic: ₹40K, DA: ₹10K, Service: 10Y
= (50,000 × 15 × 10) / 30 = ₹2,50,000
Service is considered continuous if you worked for:
Gratuity can be forfeited (fully/partially) only if:
Scenario 1: Gratuity = ₹15 lakh
Scenario 2: Gratuity = ₹25 lakh
Gratuity is a lump sum payment made by an employer to an employee as a token of appreciation for services rendered. It is calculated using the formula: Gratuity = (Last drawn salary × 15 × Years of service) / 26 (for companies covered under Gratuity Act with 10+ employees) or / 30 (for non-covered establishments). Last drawn salary includes Basic + Dearness Allowance (DA). For example, if your last salary is ₹60,000 (Basic+DA) and you worked for 10 years: Gratuity = (60,000 × 15 × 10) / 26 = ₹3,46,154. Maximum tax-free limit is ₹20 lakh.
Eligibility for gratuity: (1) Minimum 5 years of continuous service with the same employer (most common case), (2) Death of employee - eligible anytime, no 5-year rule, (3) Disablement due to accident/disease - eligible anytime, (4) Retirement after 5 years, (5) Resignation/termination after 5 years. NOT eligible: Resignation before 5 years, termination for misconduct/fraud, contract/temporary workers (unless specified in contract). Continuous service means uninterrupted employment - includes sick leave, maternity leave, lay-offs, and strikes.
Covered Establishments (under Payment of Gratuity Act, 1972): Companies with 10+ employees (at any time in preceding 12 months), Formula uses 26 working days, Gratuity is MANDATORY - employee has legal right, Maximum limit ₹20 lakh applies, Includes: Factories, mines, oilfields, plantations, ports, railways, shops, establishments. Non-Covered: Companies with <10 employees, Formula uses 30 working days (less favorable), Payment is voluntary - depends on company policy, Still recommended to pay for employee retention. Most organized sector companies fall under covered category.
Gratuity examples (assuming ₹50K last salary, covered establishment): 5 years: (50,000 × 15 × 5) / 26 = ₹1,44,231, 10 years: (50,000 × 15 × 10) / 26 = ₹2,88,462, 15 years: (50,000 × 15 × 15) / 26 = ₹4,32,692, 20 years: (50,000 × 15 × 20) / 26 = ₹5,76,923, 30 years: (50,000 × 15 × 30) / 26 = ₹8,65,385. Important: Service years are rounded - 5 years 7 months = 6 years, 5 years 4 months = 5 years. Months ≥6 round up to next year.
Gratuity tax treatment: Government employees: 100% tax-free, no limit. Private employees (covered under Act): Tax-free up to ₹20 lakh, Amount above ₹20L is fully taxable as salary income. Example: If gratuity is ₹25 lakh: ₹20L = tax-free, ₹5L = taxable at your slab rate. Non-covered employees: Tax-free limit = (Salary × Years × 15) / 30 or ₹20L (whichever is LOWER). No TDS on tax-free portion. Excess gratuity (ex-gratia) is shown separately in Form 16 and taxed. Tax exemption under Section 10(10) of Income Tax Act.
Payment timeline: Within 30 days of eligibility (retirement/resignation/death/disablement). If delay beyond 30 days: employer must pay simple interest @8% p.a. Nominee receives payment in case of death. Gratuity can be forfeited in these cases ONLY: (1) Termination for misconduct causing financial loss to company, (2) Acts of violence, fraud, theft, (3) Gross moral turpitude (severe misconduct). Cannot be forfeited for: Normal resignation, poor performance, small disciplinary issues, termination for business reasons. Forfeiture requires proper investigation, proof, and documented evidence. Partial forfeiture possible based on severity.