Gratuity Calculator
Calculate Gratuity in Seconds
Gratuity is a monetary benefit paid by employers to employees who have completed at least 5 years of continuous service. Under the Payment of Gratuity Act, 1972, it is calculated based on the last drawn salary and years of service.
With PayrollRabbit, you can instantly calculate gratuity amounts for employees covered under the Gratuity Act or those not covered. Perfect for HR professionals, payroll managers, and employees wanting to know the specific gratuity.
Gratuity Calculation Results
Calculation Details
Act Coverage Details
Calculation Formula
Covered under Act: Gratuity = (Last Drawn Salary × 15 × Eligible Years) ÷ 26
Gratuity = (₹35000.00 × 15 × 0) ÷ 26 = ₹0.00
Step-by-Step Explainer
How to calculate gratuity in India?
Calculate your gratuity in 3 simple steps:
Enter Employment Details
Provide the employee's last drawn monthly salary, total years of service, and any additional months worked.
Select Act Coverage
Choose whether the employee is covered under the Payment of Gratuity Act, 1972. This determines which formula and limits are applied.
View Instant Calculation
Instantly see the calculated gratuity amount, complete with a detailed breakdown of the formula and any statutory limits.
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Frequently asked questions
Visit our full FAQ page or get in touch with Frederic, Co-Founder of PayrollRabbit.
- Gratuity is a monetary 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, and serves as a form of retirement benefit or end-of-service compensation.
- Employees who have completed at least 5 years of continuous service with the same employer are eligible for gratuity. This applies to both organizations covered and not covered under the Payment of Gratuity Act, 1972.
- Gratuity is paid when an employee leaves the organization after completing 5 years of service, retires, dies while in service, or becomes disabled. It must be paid within 30 days of becoming due.
- Gratuity is calculated using the formula: (Last drawn salary × 15 × years of service) ÷ 26. Last drawn salary includes basic salary plus dearness allowance. For employees covered under the Act, the maximum amount is capped at ₹20 lakhs.
- For gratuity calculation, if the months of service in the last incomplete year are 6 months or more, it's rounded up to the next complete year. If less than 6 months, it's ignored in the calculation.
- Organizations with 10 or more employees are mandatory covered under the Payment of Gratuity Act, 1972. This includes private companies, government organizations, educational institutions, hospitals, factories, and plantations. Smaller organizations (less than 10 employees) can voluntarily offer gratuity but are not legally required to do so.
- Covered organizations must follow the Act's provisions: ₹20 lakh maximum limit and (salary × 15 × years) ÷ 26 formula. Non-covered organizations offering voluntary gratuity typically use (salary × 15 × years) ÷ 30 formula with no maximum limit, though they can choose any calculation method.
- Gratuity is partially taxable. For government employees, it's completely exempt. For private sector employees covered under the Act, gratuity up to ₹20 lakhs is exempt. Any amount above this limit is taxable as salary income.
What is gratuity?
Who is eligible for gratuity?
When is gratuity paid?
How is gratuity calculated?
How are partial years counted in gratuity calculation?
Which organizations are covered under the Gratuity Act?
What's the difference between covered and not covered under the Gratuity Act?
Is gratuity taxable?
Disclaimer: We have taken great care and gave our best effort to ensure the accuracy of the information provided by this Gratuity Calculator. However, PayrollRabbit does not accept responsibility for any errors or omissions and makes no guarantees or warranties regarding the correctness of the results generated by this free tool. By using this tool, you agree not to hold PayrollRabbit liable for any consequences, issues, or damages arising from any inaccuracies in the results produced. We recommend double-checking all results and contact us if you have any questions, feedback or concerns.