Gratuity Calculator (India — Gratuity Act 1972)
Calculates statutory end-of-service gratuity entitlement for employees under the Payment of Gratuity Act, 1972.
How This Calculation Formula is Formulated
Statutory gratuity under the Payment of Gratuity Act, 1972 is calculated based on 15 days of wages for every completed year of service. The month is standardized to 26 working days (excluding 4 Sundays), making the multiplier 15/26 of the last drawn basic salary plus dearness allowance.
Variable Definitions & Measurement Units
Employee Resigning after 7 Years and 8 Months with Basic ₹60,000
5-Year Eligibility Rule & Section 4(1) Exceptions
To be eligible for gratuity, an employee must have completed at least 5 years of continuous service with the establishment. Continuous service is defined as at least 240 working days in a year (or 190 days for underground mines or 6-day work weeks).
Exception: The 5-year continuous service rule is waived entirely if employment is terminated due to the death or disablement of the employee resulting from accident or disease.
Frequently Asked Questions About Gratuity Calculator (India — Gratuity Act 1972)
Is gratuity mandatory for all private companies?
Yes. The Payment of Gratuity Act applies to every factory, mine, oilfield, plantation, port, railway company, and shop/establishment in which 10 or more employees are employed on any day in the preceding 12 months.
Is gratuity taxable above ₹20 Lakhs?
Yes. Gratuity received up to ₹20,000,000 is tax-exempt under Section 10(10) of the Income-tax Act. Any amount received in excess of ₹20 Lakhs is added to taxable salary income.
Does gross salary include HRA and special allowance for gratuity?
No. Gratuity calculation strictly considers only Basic Salary and Dearness Allowance (DA). HRA, bonus, commissions, and other special allowances are excluded.
Can an employer pay more gratuity than the statutory formula?
Yes. Section 4(5) of the Act affirms that an employee has the right to receive better terms of gratuity under any award, agreement, or employer contract.
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