Gratuity Calculator

This Gratuity Calculator lets you calculate Gratuity Tax Exemption. Gratuity is the amount of payment made by an employer to an employee in appreciation of the past services rendered by the employee which is received at the time of retirement or in the event of death. The maximum gratuity tax exemption that an employee can avail is Rs. 20,00,000.

Gratuity-Exemption is dependent upon 2 criteria’s:

  • Status of Employee, i.e. whether Government Employee or Non-Government Employee.
  • Whether the employee is covered under Gratuity Act, 1972 or not.

FAQs on Income Tax Calculation in India

Q What is gratuity?

It is the amount received by the salaried person from their employer as mark of recognition for the long term service to the organization. An employee who has worked in an organization for a minimum period of 5 years is eligible for gratuity.
But not everyone is aware that gratuity is part of our salary. Gratuity is a reward paid by employer to Employee for services rendered by him. In simple words it is a retirement benefit received by employee when he leaves his job.

Q Who gets Gratuity?

An employee who completed 5 or more years of service is eligible for gratuity. This condition of 5 years of service is not applicable in case of death or any disability of an employee.

Q When is the gratuity received?

After completing five years of continuous service, you will be eligible to receive the gratuity benefit. It is payable:

  • On Superannuation (or) Retirement.
  • On your Resignation (or) Termination (the gratuity can be rejected in case the termination is on account of misconduct of employee)
  • On death or Disablement due to accident or disease. (the sum of gratuity will be paid to the nominee or legal heir, in this case, continuous service of five years is not applicable in this case)

Q Is the amount of gratuity received my Income?

Gratuity received by you on your retirement or during your service period is taxable under the head "Income from Salary. In case of death of employee, Gratuity will be paid to legal heir/nominee of an employee which is taxable under the head” Income from other sources".

Our experts are here to help you claim all the available tax exemptions and deductions & file your IT return in a hassle-free manner. Connect now

Q How to calculate gratuity tax treatment?

Gratuity is taxable when it is received under the head Income form salary. An employee can claim exemption maximum up to Rs. 20,00,000. However, calculation of gratuity varies according to various categories of employees as follows:

You can use our free Gratuity calculator to calculate your exemption amount.

Tax treatment
Government employee Fully Exempt
Non-government employee covered under Payment of gratuity act 1972 Maximum exemption from tax –
Least of the following:
  • Actual Gratuity received
  • Rs. 20,00,000
  • No. of completed years of service or part there of in excess of 6 month * 15/26* salary last drawn
Meaning of Salary = Basic Salary + D.A
Non-government employee not covered under Gratuity Act 1972 Maximum exemption from tax –

Least of the following:

  • Actual Gratuity received
  • Rs. 20,00,000
  • Half of Average salary * completed year of service (part of the month not considered
  • Average salary means average of salary in last 10 months preceding the month of retirement
Meaning of Salary = Basic Salary + D.A + percentage wise fixed commission on turnover

Q Am I eligible for gratuity if my tenure of service is 4 years and 6 months?

No, an employee will be eligible for gratuity only if he serves for at least 5 years in a company. However there is a Madras high court ruling which states that an employee is eligible for gratuity only if he completed 240 days in the fifth year.

Tenure of 5 years of service is not applicable in case of death or any disability of an employee. Still confused? Need experts opinion? Contact us

Q Do the employer have a right to forfeit gratuity even after completing 5 years of service?

Employer has a right to forfeit gratuity in case an employee is being terminated due to misconduct or any other act of violence.

Q Which establishments are covered under Gratuity Act?

All establishments where 10 or more workers are employed in any day of preceding 12 months are covered under this act.
Both commercial and non-commercial establishment like hospital, educational institutes are covered under the act.

Q Whether employees under contract basis are eligible for gratuity?

Yes, Contractual employees are also eligible for gratuity. Contractor is responsible to pay gratuity to employees. In case Contractor denies, responsibility arises on principal employer.

Q What is the time limit for payment of gratuity?

Employer is responsible to determine the gratuity and paid the same within 30 days of gratuity became payable.

Q How do I nominate person to receive gratuity in case of death?

After completing one year of service, an employee is eligible to file nomination in Form F. Download Form F