Question 1

How many years of service do I need to be eligible for gratuity?

Accepted Answer

At least 5 years of continuous service with the same employer, except in case of death or disablement, where this requirement is waived by law.

Question 2

What counts as 'salary' for the gratuity formula?

Accepted Answer

Basic salary plus dearness allowance (DA), if your employer pays DA. It does not include HRA, bonuses, or other allowances.

Question 3

How does the rounding of years of service work?

Accepted Answer

If your service in the final year is 6 months or more, it rounds up to the next full year. Below 6 months, it's dropped. For example, 9 years 7 months counts as 10 years; 9 years 4 months counts as 9 years.

Question 4

Is gratuity fully tax-free?

Accepted Answer

For government employees, yes. For other employees covered by the Act, it's exempt up to the lower of the amount received and a lifetime ceiling of ₹20 lakh across all employers, whatever exceeds that is taxed as salary income.

Question 5

Does this calculator apply if my employer isn't covered by the Payment of Gratuity Act?

Accepted Answer

The payout estimate switches to the /30 formula commonly used for non-covered employers, but the tax exemption isn't calculated in that case, since it uses a different formula based on your average salary over the preceding 10 months rather than your last drawn salary.

Gratuity Calculator

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