Your inputs
How this is calculated +
Eligibility (Section 4 of the Payment of Gratuity Act 1972): an employee becomes eligible after completing 5 years of continuous service. The 5-year condition is waived in case of death or disablement. The Act applies to establishments with 10 or more employees and to specific categories of workplaces.
For employees covered under the Act:
Gratuity = Last drawn (Basic + DA) × (15 / 26) × Years of service
Service of 6 months or more in the last year is rounded up to a full year. Less than 6 months is rounded down. The 26 in the denominator represents the working days in a month for this Act.
For employees NOT covered under the Act (typically smaller establishments, or domestic / foreign companies that pay gratuity by contract):
Gratuity = Average of last 10 months’ salary × (1 / 2) × Years of service
Here the calculator uses your “last drawn salary” as a proxy for the 10-month average. Years of service is taken in completed years only (no rounding up).
Tax exemption (Section 10(10) of the Income-tax Act): the exemption is the least of (a) actual gratuity received, (b) eligible amount per the formula above, and (c) ₹20 lakh aggregate over all employers in the employee’s lifetime. Anything above the exempt amount is taxable as salary.
Indicative only. Coverage under the Act, the precise definition of “wages”, treatment of variable pay/commission and the lifetime ₹20 lakh exemption need careful verification for each case. Talk to us to compute your actual entitlement and tax liability.