Gratuity Calculator is an online tool that helps employees to estimates their gratuity amount on the basis of their last drawn salary and years of service. It provides after a minimum of 5 years of the continues service or employment.
So, in this article we are going to discuss all the basic knowledge of Gratuity, gratuity calculator, how it works, how to use it ans well as tax implications on gratuity and etc.
What is Gratuity?
Gratuity is a kind of financial benefit which is provided by the employers to the employees as a reward or token of appreciation for their long term service. If you are a government employee or a private sector employee you can receive the sum of lump-sum amount as a gratuity on your retirement or in cases of death or disablement.
Gratuity Calculator
Gratuity Calculator is a tool which is useful for estimates the amount of gratuity which an employee is initially receive for their service with an employer, it need the minimum period of time is five years. Basically this calculator helps you to calculating gratuity easily.
So, initially the calculator uses a formula which is based on the employee’s last drawn salary and years of service.
Why Use a Gratuity Calculator?
Quick & Accurate Results: By using the calculator users can easily get the results as compare to manual. It helps in avoid manual errors.
Transparency: So, this tool is basically helpful to understand how much you’re entitled to.
Financial Planning: Basically this tool helps you to planning for your future finance which helps you in retirement as well as job transition planning.
Gratuity Calculator India 2025
In the 2025, government of India doesn’t introduced any major changes to the gratuity rules but still employees should know this,
- Maximum Gratuity Limit: As per the act, maximum gratuity limit is ₹20 lakhs which is one time payment.
- Eligibility: For the eligibility for gratuity, employee has minimum five years of continues service in the same company or organization. In that case exceptions apply in the case of death or disability.
How to Use an Online Gratuity Calculator?
For using an online gratuity calculator, you just need to follow the simple steps which is below,
- First step is enter the basic salary+DA.
- While in the second step, input total years of service.
- After that, select if your employer is covered under the Gratuity Act.
- Then, the calculator will display the estimate gratuity amount on the screen.
Example: If your last salary is ₹50,000 and you’ve worked for 7 years, your gratuity = (50,000 × 15/26) × 7 = ₹2,01,923.
Gratuity Calculation Formula
The formula is different for covered and non-covered employees under the Payment of Gratuity Act, 1972 governs gratuity in India.
Formula for employees Covered under the Gratuity Act
If your company has more then 10 employees, the act applies this formula:
Gratuity = (Last Drawn Salary × 15/26) × Completed Years of Service
- Where,
- Last Drawn Salary = Basic Salary + Dearness Allowance (DA)
- 15/26 = Represents 15 days of salary for each year (26 working days in a month).
- Years of Service – Rounded to the nearest full year (e.g., 5 years 8 months = 6 years)
Formula for employees Not Covered under the Gratuity Act
In this, private companies with fewer then 10 employees may still offer gratuity, but the calculation of that is different.
Gratuity = (15 × Last Drawn Salary × Years of Service) / 30
(Gratuity Calculation for Private Employees)
In that, 30 days are count/considered instead of 26 days.
How to Calculate Gratuity Amount
Let’s take an example of gratuity calculation for an employee who has 10 years of service with salary of 60,000 rupees.
Details of Employee:
- Last Basic Salary + DA = ₹60,000
- Years of Service = 10 years
- Employer is covered under the Gratuity Act.
Calculation:
Gratuity = (Last Drawn Salary × 15/26) × Completed Years of Service
- = (60,000 × 15/26) × 10
- = (34,615) × 10
- = ₹3,46,150
Tax on Gratuity in India as on 2025
Gratuity Tax Rules in India (2025)
- For the Government Employees: Gratuity is completely tax-free.
For the Private Employees (covered under the Gratuity Act):
You don’t have to pay tax on the lowest of these three:
- ₹20 lakh
- The actual amount of gratuity you got
- 15 days’ salary × number of years you worked
- Private Employees (not covered under the Act):
The gratuity amount is taxable, and tax will be charged as per your income tax slab.
Conclusion
A tool Gratuity Calculator helps employees to estimates their rightful benefits without any kind of dependency on employers. If you are in private sector or in government sector there is formula for both. So, this tool is useful for every employees who have worked continuous in the same organization.
FAQs
Is gratuity paid if I switch jobs before 5 years?
No, only after 5+ years of continuous service.
Is gratuity applicable for contract workers?
Only if employed directly by the company (not through a contractor).
How is gratuity different from PF and pension?
PF – Employee + employer contribution.
Pension – Monthly post-retirement payout.
Gratuity – One-time lump sum for long service.
