Gratuity Calculator
🎁 Gratuity Calculator
Calculate Your Gratuity Payout When Leaving a Job
📋 Gratuity Tax Rules
| Employee Type | Tax Exemption Limit |
|---|---|
| Central Government Employees | ₹25 Lakh (w.e.f. May 2024) |
| State Government Employees | As per state rules (typically ₹20-25 Lakh) |
| Private Sector (Covered under Act) | ₹20 Lakh (or actual, whichever is lower) |
| Private Sector (Not Covered) | ₹20 Lakh (with different calculation) |
📊 Gratuity for Different Tenures
Gratuity Calculation: Complete Guide for Indian Employees
Gratuity is a lump sum amount paid by an employer to an employee as a token of appreciation for services rendered. It's governed by the Payment of Gratuity Act, 1972.
Gratuity Formula
Gratuity = (15 × Last Drawn Salary × Years of Service) / 26
For Government Employees:
Gratuity = (15 × Last Drawn Salary × Years of Service) / 30
Eligibility Criteria
- Minimum Service: 5 years of continuous service (4 years 240 days considered as 5 years)
- Applicable Organizations: Companies with 10 or more employees
- Exception: In case of death or disability, 5-year rule doesn't apply
When is Gratuity Paid?
- Retirement (superannuation)
- Resignation after 5 years
- Death of employee (paid to nominee)
- Disablement due to accident or disease
Frequently Asked Questions
Frequently Asked Questions
What is gratuity?
Gratuity is a lump-sum amount paid by an employer to an employee as a token of appreciation for their long-term service. It is a statutory benefit, governed by the Payment of Gratuity Act, 1972.
Who is eligible to receive gratuity?
An employee is eligible for gratuity after completing at least 5 years of continuous service with the same employer. The 5-year rule is relaxed in cases of death or disablement of the employee.
How is the gratuity amount calculated?
For employees covered under the Act, the formula is: (Last Drawn Monthly Salary / 26) * 15 * Number of Years of Service. The last drawn salary includes basic pay and dearness allowance.
What is the maximum tax-free gratuity amount?
The tax-free gratuity limit for central government employees has been increased to ₹25 Lakhs as per the latest updates. For other employees, the tax-exempt limit is ₹20 Lakhs.
Does this calculator consider the latest rules?
Yes, this calculator is updated with the latest gratuity rules, including the enhanced tax-free limit of ₹25 Lakhs for central government employees, ensuring your calculations are current and accurate.
This gratuity calculator is for informational and educational purposes only. The calculations are based on the Payment of Gratuity Act, 1972. Actual gratuity may vary based on company policies, applicable laws, and specific employment terms. For employees not covered under the Act, gratuity may be calculated differently. Always verify with your employer's HR department for accurate gratuity calculations. This tool should not be considered as legal or financial advice.
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C.K. Gupta
Hello, I am C.K. Gupta Founder of Taxgst.in, a seasoned finance professional with a Master of Commerce degree and over 20 years of experience in accounting and finance. My extensive career has been dedicated to mastering the intricacies of financial management, tax consultancy, and strategic planning. Throughout my professional journey, I have honed my skills in financial analysis, tax planning, and compliance, ensuring that all practices adhere to the latest financial regulations. My expertise also extends to auditing, where I focus on maintaining accuracy and integrity in financial reporting. I am passionate about using my knowledge to provide insightful and reliable financial advice, helping businesses optimize their financial strategies and achieve their economic goals. At Taxgst.in, I aim to share valuable insights that assist our readers in navigating the complex world of taxes and finance with ease.
