How To Calculate Gratuity? Learn The Formula Of Gratuity Calculation

Gratuity is a monetary amount paid by a company to their employee once the employee retires or leaves the services of the company

How To Calculate Gratuity?

The amount of gratuity that an employee is eligible to receive as per the Gratuity Act can be calculated by using this  exact formula: 

Gratuity = n*b*15 / 26

Where, n= tenure of employment completed in the company 

b= last drawn basic salary+ dearness allowance 

Consider Using An Online Gratuity Calculator

If you’re having difficulty calculating your gratuity using the given formula, you can also consider using free online gratuity calculators offered by finance-related websites to estimate how much gratuity you are eligible to get.

Eligibility For Gratuity

Employees working in private companies that offer EPF are eligible to get a gratuity after completing 5 years of work in the same company. Employees can also get gratuity before 5 years in case they are injured/disabled due to an accident or illness.

Payment Of Gratuity Act

Gratuity payments are regulated as per the rules laid out in the Payment of Gratuity Act 1972. The amount of gratuity is based on the employee's last drawn salary and years of service.

Taxation On Gratuity For Government Employees

Gratuity received by government employees is completely exempt from taxes.

Taxation On Gratuity For Private Employees

For private sector employees, gratuity can be tax-free as long as it’s under ₹20 lakh. The maximum tax-free gratuity that an employee can receive over their entire career from different companies is ₹20 lakh.

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