Gratuity calculator

An employee with at least five years of continuous service with the same employer, when they resign, retire or are let go. Employees on fixed term contracts qualify after one year. The minimum does not apply on death or disablement, when gratuity is paid to the employee or their nominee for the service completed.

For employers covered by the law, gratuity is 15 days' wages for every year of service: last drawn monthly wages × 15 ÷ 26 × years. A final part year of more than six months counts as a full year. Employers not covered pay half a month's average salary for each completed year, if they pay gratuity at all.

Wages for gratuity are basic pay plus dearness allowance. Under the labour codes, if allowances excluded from wages come to more than half of total pay, the excess is added back, so wages are never less than half of total pay. Enter your total monthly pay in the calculator to apply this.

Gratuity is fully tax free for central and state government employees. For everyone else it is tax free up to the least of three figures: the amount received, the amount worked out by the formula, and ₹20 lakh. Anything above that is taxed as salary in the year it is received.

The amount an employer must pay under the law is capped at ₹20 lakh. An employer can choose to pay more under its own policy or the employment contract, but anything above the tax free limit is taxable.

Within 30 days of it becoming payable, usually the leaving date. Late payment carries interest. It is normally paid as part of the full and final settlement.

Some courts have treated 240 days worked in the fifth year as completing five years of continuous service, but the position is not settled for every employer. This calculator uses five full years. If you are close, check your employer's policy or take advice.