Calculate your gratuity amount as per the Payment of Gratuity Act 1972. Works for both covered (10+ employee) and non-covered organisations.
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Calculate Gratuity
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Software Engineer, 7 years
Last Basic + DA: ₹60,000/month
Formula: 60,000 × 15/26 × 7
Gratuity = ₹2,42,307
Tax: fully exempt (below ₹20L limit)
Bank Manager, 25 years
Last Basic + DA: ₹1,20,000/month
Formula: 1,20,000 × 15/26 × 25
Gratuity = ₹17,30,769
Tax: fully exempt (below ₹20L limit)
Senior Executive, 30 years
Last Basic + DA: ₹2,00,000/month
Formula: 2,00,000 × 15/26 × 30
Calculated: ₹34,61,538
Tax: ₹20L exempt, ₹14.6L taxable at slab
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For employees covered under the Act: Gratuity = (Basic + DA) × 15/26 × Years of service. For non-covered: (Basic + DA) × 15/30 × Years. The tax-free limit is ₹20 lakh.
Gratuity is payable when an employee completes at least 5 continuous years of service, on resignation, retirement, death, or disablement due to accident/disease.
Gratuity up to ₹20 lakh is fully tax-free for private sector employees under Section 10(10). Government employees get full exemption. Amount above ₹20L is added to income and taxed.
The denominator 26 represents the number of working days in a month (excluding 4 Sundays). The numerator 15 represents 15 days of basic salary per year of service.
Gratuity received from a covered employer (companies with 10+ employees) is tax-exempt up to Rs 20 lakh. Government employees are exempt without any limit. Private sector exemption = minimum of actual gratuity, Rs 20L, or 15 days salary x years of service. Any amount above Rs 20L is taxable as salary income in the year of receipt.
Under the Payment of Gratuity Act: if a fraction of a year is greater than 6 months, it is rounded up to a full year. Example: 8 years 7 months = 9 years gratuity. 8 years 4 months = 8 years gratuity. Companies can offer more liberal gratuity terms than the statutory minimum as part of their employment policy.
For covered employers (Payment of Gratuity Act): Gratuity = (Last drawn basic + DA) x 15/26 x Years of service. The 15/26 factor equals 15 days of salary assuming a 26-day work month. Last drawn salary includes basic plus dearness allowance only - not HRA or other allowances. For uncovered employers, some companies use a 30-day month formula.
Under the Payment of Gratuity Act, gratuity is payable after 5 continuous years of service. The 5-year rule is relaxed in case of death or disability - gratuity is payable even for service less than 5 years. The Supreme Court has ruled that fixed-term contracts renewed continuously for 5+ years also qualify for gratuity.
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