The Gratuity Calculator provides precise statutory projections for salaried employees in India under the Payment of Gratuity Act, 1972. If you have completed 5 years of service, you are legally entitled to this benefit. Based on your basic salary of ₹0.5L and 10 years of service, your estimated gratuity payout is ₹2.885L. This tool uses the standard 15/26 formula to ensure institutional-grade accuracy for your exit planning.
The Gratuity Calculator provides precise statutory projections for salaried employees in India under the Payment of Gratuity Act, 1972. If you have completed 5 years of service, you are legally entitled to this benefit. Based on your basic salary of ₹0.5L and 10 years of service, your estimated gratuity payout is ₹2.885L. This tool uses the standard 15/26 formula to ensure institutional-grade accuracy for your exit planning.
How Does the Gratuity Formula Work?
The calculation heavily depends on whether your company is covered under the Payment of Gratuity Act (generally, an establishment with 10 or more employees).
Gratuity = (15 × Last Drawn Salary × Years of Service) / 26Where:
- • 15 = Represents 15 days of wages for every completed year of service
- • 26 = Total working days in a month (excluding Sundays)
- • Last Drawn Salary = Only Basic Salary + Dearness Allowance (DA)
- • For employees NOT covered under the Act: The divisor is 30 instead of 26.
- Eligibility Rule: You MUST complete 5 years of continuous service with the same employer.
- The Rounding Rule: If you work for 7 years and 7 months, it is rounded up to 8 years. If you work for 7 years and 5 months, it stays at 7 years.
- The 4 Years 240 Days Exception: Thanks to legal precedents, working 4 years and 240 days in the 5th year legally qualifies as exactly 5 years of continuous service for gratuity purposes.
- Tax Exemption Limit: For private employees, gratuity up to ₹20 Lakh is completely tax-free under Section 10(10) of the Income Tax Act.
Scenario: Gratuity Payout Analysis
For an employee with a Basic Salary + DA of ₹0.5L and a service tenure of 10 years:
• Formula: (15 × ₹0.5L × 10) / 26
• Statutory Gratuity: ₹2.885L
• Tax Status: Exempt up to ₹20 Lakh.
This payout acts as a significant long-term service reward, helping bridge the gap between employment and pension life.
Base Salary: ₹0.5L
Service Years: 10
Gratuity Payout: ₹2.885L
Tax Liability: Nil (under ₹20 Lakh)
Gratuity Tax Rules by Employee Type
How Income Tax treats your Gratuity payout:
| Employee Type | Tax Exemption Limit | Taxation on Excess Amount |
|---|---|---|
| State/Central Govt Employee | Fully Exempt (No Limit) | Not Applicable |
| Private Employee (Covered under Act) | Up to ₹20 Lakh | Taxed directly at your Income Tax Slab rate |
| Private Employee (Not Covered) | Lowest of: ₹20 Lakh, Actual Gratuity, or Half-month salary per year | Taxed directly at your Income Tax Slab rate |
Frequently Asked Questions
⚠️ Disclaimer
The figures provided by this calculator are estimates based on the inputs you provide and standard financial formulas. STOCKCALC.IN does not offer investment advice. Please consult a qualified financial advisor before making any investment decisions.