Gratuity Amount Calculator
Covered: Organisations with 10 or more employees (formula: 15/26 of monthly salary × years).
Not Covered: Smaller organisations or specific sectors (formula: 15/30 of monthly salary × years).
Gratuity Calculation Summary
⚠️ Gratuity is payable only upon retirement, resignation (after 5 years), death, or disability. For death/disability, the 5-year minimum service period is waived. Gratuity received from a government employer is fully exempt. Fractions of a year ≥ 6 months are rounded up to the next year for covered employees.
Gratuity Formula & Rules at a Glance
| Parameter | Covered Under Act | Not Covered Under Act |
|---|---|---|
| Eligibility (organisations) | 10 or more employees at any point | Fewer than 10 employees |
| Minimum service | 5 continuous years (waived on death/disability) | 5 continuous years (waived on death/disability) |
| Formula | (Basic+DA) × 15/26 × Years | (Basic+DA) × 15/30 × Years |
| Rounding of years | ≥6 months in a year = 1 full year | As per employment contract |
| Maximum gratuity (tax-free) | Rs. 20,00,000 (Rs. 20 Lakhs) — raised w.e.f. 29 March 2018 | |
| Tax on excess | Amount above Rs. 20 Lakhs taxed as per income slab | |
Tax Exemption on Gratuity — Section 10(10)
| Employee Category | Tax Exemption |
|---|---|
| Government employees (Central/State/PSU) | Fully exempt — no upper limit |
| Covered under Payment of Gratuity Act | Least of: Actual gratuity received | Statutory gratuity (15/26 × salary × years) | Rs. 20 Lakhs |
| Not covered under Payment of Gratuity Act | Least of: Actual gratuity received | ½ month's average salary × years | Rs. 20 Lakhs |
Frequently Asked Questions
Only Basic Salary + Dearness Allowance (DA) are included in the gratuity formula. Other allowances like HRA, travel allowance, special allowances, bonuses, and commissions are excluded. This is a common point of dispute — employees sometimes expect all CTC components to be included, but the law only mandates Basic + DA. If your offer letter shows a consolidated CTC without breakup, seek legal advice to determine your Basic for gratuity purposes.
The Payment of Gratuity Act uses 26 working days per month as the standard (a 4-week month with Sundays off). The formula 15/26 means you get 15 days' salary for every completed year of service. For employees not covered under the Act, courts and employers often use 30 (calendar days), giving 15/30 = 0.5 months per year. The 26-day base gives a slightly higher gratuity — 15/26 = 0.577 months per year vs 15/30 = 0.5 months per year.
Yes, in limited circumstances. Under Section 4(6) of the Payment of Gratuity Act, an employer can forfeit gratuity wholly or partially if the employee is dismissed due to: (a) acts of wilful omission or negligence causing damage to property, or (b) riotous or disorderly conduct, or an offence involving moral turpitude. However, the right to forfeit is not absolute — the employer must follow due process, and courts can intervene if forfeiture is unjust. Routine resignations, poor performance, or disputes do not justify forfeiture.
Yes. The Payment of Gratuity Act, 1972 is a central legislation that applies across India including Pondicherry (Puducherry). Any organisation — factory, mine, oilfield, plantation, railway, shop, or establishment — employing 10 or more persons at any time during the preceding 12 months is covered. Even if employee count later falls below 10, the Act continues to apply. Private companies, shops, offices, and educational institutions in Pondicherry must pay gratuity. Failure to pay gratuity is an offence under Section 9 of the Act — punishable with imprisonment and fine.
This is a frequently litigated question. As per the Payment of Gratuity Act and Supreme Court interpretation: a fraction of a year equal to or more than 6 months is counted as a full year. Therefore, 4 years and 7 months = 4 years (does not qualify). But 4 years and 8 months = 5 years (qualifies for gratuity). This rule applies only to rounding completed years within an employment — the minimum 5-year eligibility requirement itself is strictly construed. Always check your joining and last working date carefully before claiming gratuity.
The employer must pay gratuity within 30 days of it becoming payable. If not paid within 30 days, the employer is liable to pay simple interest on the gratuity amount at rates specified by the government (typically 10% p.a.). The employee must file a written application to the employer within 30 days of becoming eligible, though the Act allows condonation of delay. If the employer disputes, the Controlling Authority (typically the Labour Commissioner of Pondicherry) can adjudicate.
Gratuity Dispute? Labour Law Assistance in Pondicherry
SG Law India handles gratuity disputes, wrongful forfeiture cases, and Labour Court representation in Pondicherry. If your employer has withheld, delayed, or underpaid gratuity, consult our labour law team.