Gratuity Calculator
Calculate Gratuity in Seconds
Gratuity is a financial benefit given to employees who have worked consistently for the same company for at least five years. It is typically paid within 30 days as a lump payment when someone resigns, retires, becomes disabled or dies.
Regulated by the Payment of Gratuity Act (1972), it defines that any public or private organisation that employs ten or more people (exception of apprentices) is obliged to pay their employees for gratuities.
With PayrollRabbit, you can easily calculate gratuity amounts for employees covered under the Gratuity Act or those not covered. This free tool is perfect for HR professionals, payroll managers, and employees wanting to know the specific gratuity amount.
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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 the sum of money given by an employer to employees who have completed at least 5 years of continuous work. It is an appreciation of their employees' long service and contributions to the business. The Payment of Gratuity Act of 1972 governs it. Workers who become restrained as a result of an illness or accident may be eligible for a gratuity sooner. The sum is calculated by years of service and the most recent salary received.
- Employees who have worked continuously for at least 5 years with the same employer are eligible for gratuity.
- Companies are obliged to pay gratuity within 30 days, as soon as an employee leaves a company, retires, dies in service, or becomes disabled.
- Gratuity is calculated using the following formula: '(Last drawn salary × 15 × years of service) ÷ 26'. Last drawn salary includes basic salary plus dearness allowance. The maximum amount is capped at ₹20 lakhs for employees covered under the Act.
- In the gratuity calculations, if the months of service in the last 'incomplete' year are 6 months or more, it is rounded up to the next complete year. If the current year is less than 6 months, it is ignored in the calculation.
- Organisations, which have 10 or more employees are obliged to be covered under the Payment of Gratuity Act, 1972. This includes private companies, government organisations, plantations, educational institutions, hospitals, and factories. Companies with less than 10 employees can voluntarily offer gratuity, but are not legally required to do so.
- Yes, gratuity is partially taxable. For government employees, it is completely exempt. Yet, for private sector employees covered under the Act, gratuity up to ₹20 lakhs is exempt. Any amount above this threshold is taxable as salary income.
What is gratuity?
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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.