Personal finance simplified

How to calculate your Gratuity in India

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Gratuity is a part of salary offered by an organization to an employee.  It is one of the retirement benefit offered to an employee, a lump sum that a company pays when an employee leaves an organization. In India, Gratuity is set out under the Payment of Gratuity Act, 1971. As per the Gratuity Act, It will be paid when an employee completes five or more than five years of service in an organization.

1. Any person employed on salary/wages (Also applicable for the part time or contract employees) 2. At the time of retirement 3. Resignation or on Superannuation 4. The completion of continuous service of five years shall not be necessary when an employee passes away or disabled due to accident or illness (In case of death, gratuity will be paid to the  nominee)

Every organization or factory must pay gratuity to its employees. BUT the gratuity is not mandatory for the  factory, organization or company which employs less than TEN persons. 

Gratuity

 

How to calculate your gratuity in India

If you are covered under the Payment of Gratuity Act, 1971, the gratuity amount will be calculated as follows:

  • Employee’s are entitled to get the salary of 15 days for every completed years as gratuity.
  • Only the basic pay and DA (if any) are considered while accounting for the salary. It means any bonus, special allowance and HRA are not taken for the gratuity calculation.

Gratuity calculation

Gratuity = (Salary / 26) x 15 x Number of years in service

Where;

Salary is “Last drawn basic pay + DA”

26 is the average working days in a month (As per Gratuity rules – 26 days not 30 days calculated)

15 is the actual days considered for gratuity in a year

Also read: Link you Aadhaar with PAN card

 

Example of Gratuity Calculation

Tamil had been working with an organization for past 5 years, 9 months. Her current basic pay = Rs 15,000 pm, DA = Rs 3,000 pm. So what would be her gratuity

The last drawn salary of Tamil

= Basic salary + Dearness Allowance

= 15,000 + 3000 

= 18,000

 

Years of Service

= 5 years 9 months

= 6 years

 

Gratuity Calculation

= (Salary / 26) x 15 x Number of years in service

= 18,000/26 * 15 * 6

= 62,308 (Total Gratuity).

 

This means if you have completed five years and nine months of service, the number of years would be considered as six years for calculation for your gratuity benefit. AND if your service period is five years and five months then your gratuity will be considered only for five years.

 

Also read: HRA – Complete guide 

Important points to remember
  • Nil tax for the Government employees on the gratuity amount.
  • For private sector employees, No tax on gratuity to a maximum of Rs 10 lakh.

If you have any doubts regarding your Gratuity Calculation, kindly leave as comments. We would try our level best to address those.

 

 

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67 Comments
  1. Jit says

    Hi
    Just want to understand if an employee resigns while he is onsite , would he/she be eligible for gratuity? What would be the calculation of gratuity in that case-> Would it be based on the last drawn indian salary or the last drawn onsite salary?

    1. Mohammad Ali says

      It is based your last drawn Indian Salary

  2. Bhudeb Samanta says

    I have retired from Durgapur Steel Plant, SAIL on 31st August, 2016 after continuous service of 39 years. As per SAIL Gratuity Rules, the employer paid gratuity for 30 years by adopting the formula Monthly wage X 15 divided by 26. But, Service beyond 30 years, there is a provision in the SAIL Gratuity Rules for payment of at the rate of one month’s salary for every completed year of service. For these 9 years, the employer paid simply 9 months salary, without considering month as 26 days as considered above. Please let me know whether I may get gratuity for the years beyond 30 years of service by considering the month as 26 days as per Supreme Court Order in the case of Shri Digvijay Woolelen Mills Ltd. Vs Mahandra Prataprai Buch. (Mobile No. 9333906660)

  3. Prince says

    Hi Sir I joined 24th March 2007 and regiened 9th March 2017 it will be count as 10 years or 9 years my basic salary near 12000 then how should I calculate my gratiuity n it will be how much.

    1. Mohammad Ali says

      Hello Prince, It is very simple to calculate your Gratuity. But you need to know your Basic Pay and your Dearness Allowance. You can check these details in your Payslip.
      Gratuity = [(Your Basic Pay + D.A) x 15 days x No. of years of service ] / 26.

      Good luck.

  4. Ramesh says

    Hi Sir

    Company Established 2006, I am Join in 2008 , But EPF Established 2012, i Relive in Aug 2016, I am Eligible for gratuity , My Question is (Date of Join or EPF Join Date ) Gratuity calculation

  5. Dinesh says

    Hi Sir.

    Is there any difference in calculation for employees who are not covered under gratuity act?

    Thank you for your help

  6. AJAY SHRIVASTAVA says

    It is informed by some employees that for every year of complete service gratuity calculation will be one month per year instead of 15 days. is it true?

    1. Rajesh says

      @ Ajay Shrivastava
      No only 15 days per year will be taken for gratuity calculation, you can calculate gratuity online here

  7. Prajakta says

    I work with pvt sector from last 12 years my present salary of Rs 24000/-per month but in this firm employees below 10 no’s now i want to resign the job kindly explain my gratuity amount for my reference purpose.
    please suggest me the best.

  8. Vijay says

    Can’t I claim for full 8 years?

  9. Vijay says

    Sir

    I resigned from service in a deemed university campus last July, 2016. I joined there on 2008 July. In between I had to take two long leaves
    1. 2013 Aug 24 – 2013 November as extension of my 84 days eligible maternity leave.
    2. 2014 July- 2014 December as a post surgery requirement.

    Now when they calculated my gratuity they calculated it for 7 years 2 months 28 days..

    I have a confusion there.

    If calculated independently, I have worked for more than 6 months in every calendar year.

    Also, my leaves were genuine ( maternity leave of 6 months is legally allowed everywhere and the other was post surgical for which I had given the records).

    Am I eligible for my full gratuity?

  10. anantha shetty says

    1. if employee join 15.8.2009 does it counts complete year of 2008 – 2009?

    2. after 5 years how to account and which head means gratuity fund and gratuity provision under which head have to create?
    3. i have seen balance sheet here different amount shown as gratuity some amount and as gratuity provision is different amount?

  11. Rahul garg says

    i am working in company from 12 years what is my gratuity if my basic salary 16k of current year

  12. Vineet says

    Hi
    I joined my firm on 2 May 2012 and am leaving on 27 Jan 2017. It is a 5 day/week type of role.

    Am I eligible for gratuity as per law?

  13. Derick Fernandis says

    If a employee work for 28 years 6 month and 26days then how many competed years of service should I consider for calculation gratuity covered under gratuity Act 1972

  14. firoz khan says

    dear sir,

    im firoz khan i had work in a company 5 years & my gross salary is 17000/- my company is not giving any slip. we want just calculation my gratuity amnt. and i have resigned that company, & join another firm.

  15. Mauli Singh says

    Hi Sir,

    I am working in hospitality industries DOJ 9-11-2011 my five yrs completion on 9-11-16 my last working day will be on 30-11-16.

    I am eligible to get gratuity
    Pls reply

  16. Riddhi says

    Dear Sir,

    Please guide me one of my employee worked for 6 years 9 months. His salary calculation days is 30 days. So now at time of gratuity payment which days i need to count 26 or 30 days

  17. Anita says

    Dear Sir,

    I have served an institution for 9 years and 4 months including notice period (1 month) and probationary period (6 months).However, i have received gratuity for only 8 years. When asked the accountant informed me that in the first six months (probationary period), the office has not covered me under PF, and since my gratuity is calculated from the confirmation date i.e., April 2007. From April 2007 to January 2016, it counts to 8 years and 10 months, still i got 8 years gratuity saying I have not completed 9 years. Kindly help, and guide

  18. Mohan says

    A person just retired, he served in company for 8 years and 5 months. For gratuity calculation should we take 8 years or what we should apply.
    Please provide the details.

    1. Rajesh says

      @ Mohan
      You have to take 8.5 months as his service to calculate gratuity.

  19. Archana Sharma says

    Hi , i had joined my last employer on 29 sep 2011 and left it on 30th aug 2016 ie i have worked for 4 yrs 11months and 1 day. Will i be elligible for gratuty.

  20. Anisha says

    hi sir if my date of joining the organisation is on 01/02/1991 and date of resignation is on 31/07/2016 what will be the number of years of service to be considered for gratuity calculation is it 25 years or 26 years?

  21. ganesh malpani says

    i was working in pvt. ltd company and resigned after completion of 4 year 10 months and 23 days. I had taken some personal leaves, sick leaves during this period. will i be eligible for gratuity.

  22. Bhavik Kachhad says

    Hi, Thanks for sharing this information.
    I am working in a Pvt. Ltd. Organization since last 8 Years.
    My organisation had not offered or disclosed anything about gratuities at the time of joining.
    Should i have to ask for gratuity when i leave job?
    I mean it is compulsory for every pvt ltd companies to give gratuities to their staff who completed 5 years or more continues service? AND
    What i have to do if they refuses to give my gratuity?

    Thanks in advance.

  23. Ram says

    Hi,
    I joined my company on 06/01/2012 and have been working continuously ( 5 days a week) except for taking earned leave and sick leave. If I resign today, will I be eligible for Gratuity?

    1. Mohammad Ali says

      You’re eligible Ram. As leaves, sickness or accident are considered as part of your service. Hence any break which is not due to the fault of the employee – would not be counted.

  24. BA says

    Dear Sir,

    with reference mesge I have been working one Co. 5 years Completed but I taken 2 Months Leave due to Medical Purpose after i taken treatment i continued work in that regard in case i reign shall i got Gratuity

    1. Mohammad Ali says

      Hi Vishu, Continuous service including any break due to leave, sickness or accident. Hence any break which is not due to the fault of the employee – would not be counted.

  25. Arcot K Balraj says

    What is the formula for gratuity calculation if the firm is with 5 days a week?

    1. Mohammad Ali says

      Calculation will remain same Balraj, it is the company which gives benefit (2 days rest in week) to employees.

  26. Sushant says

    Hello Sir,
    I am working in a company and I have been completed 5 years of service. Can I get my gratuity without giving resignation and continue in my service.

    1. Mohammad Ali says

      Hello Sushant,

      Gratuity is only paid to an employee when he/she either retires or his/her employment is terminated or he/she resigns or upon the death

  27. krishna says

    hi,
    i am working for 9 years 5 months 10 days. how my gratuity will calculate. is it 9 years or 10 years

    1. Mohammad Ali says

      Hi Krishna, It will be calculated for 9 years only
      but
      if you have worked for more than 6 months in a year, then it will be treated as 1 completed year.

  28. Ravi says

    Hi,

    Good morning!

    I have completed 8years 5months and 30days in an organization. Am I eligible for a gratuity of 8years or 9 years? 30th July is my last working day while July has 31days and 31st happens to be a Sunday.

    Thank you

  29. Bhushan says

    Hi,

    I have worked for 4 Years, 9 months and 6 days in my previous company, am I eligible for gratuity?

    1. Mohammad Ali says

      Yes you’re eligible for gratuity as per gratuity act 1972. Only condition is – you are entitled to get gratuity only after the termination of employment. This termination may be of Job switch, retirement or resignation.

  30. sunil says

    What is the transfer rule gratuity.
    Eg one company to other company.

    1. Mohammad Ali says

      Answer is yes, only if both the companies are under same management.

  31. M.K. TOKAS says

    I have completed 32 years of service in a private limited company. What ismy entitlement of gratuity?

    1. Mohammad Ali says

      Hi Tokas, you are entitled to get the salary of 15 days for every completed years as gratuity. Only the basic pay and DA (if any) are considered for gratuity calculation.

  32. swethakoushik says

    hi sir now i am working in a company for past 18 months am i eligible for gratuity
    company is deducting a sum of rs 1500 from salary towards gratuity. How do i collect back the amount. If in case i resign before completing 5 years service in the same company.

    1. Mohammad Ali says

      Hi Swetha, To get the gratuity you must complete 5 years in the service (approx. 4 years 6 months).

  33. S.Kumaresan says

    Sir, I have been receiving my salary as basic salary+HRA+conveyance allowance.
    Pls. clarify which are taken to calculate Gratuity payment.

    1. Mohammad Ali says

      Hi Kumaresan, According to the law – only two following components are taken into consideration for gratuity calculation

      1. Your Basic Salary
      2. Dearness Allowance (if any)

      Note: HRA, bonus, special allowance and reimbursements are not taken for the gratuity calculation.

  34. Ramesh says

    Hi, I have completed 5 years, 6 months and 8 days on my last day with my company (after 2 months notice period), will I get Gratuity for 5 years or 6 years?

    1. Mohammad Ali says

      6 months of a year can be counted as one year. If you have completed 5 years and 6 months in service, you will get the gratuity for 6 years.
      Gratuity Amount = Salary x Tenure x 15/26

  35. YATHISH.H.KAKANUR says

    SIR, I HAVE FINSHED 5 YEARS AND 5 MONTHS IN A COMPANY, LET ME KNOW CAN I ELIGIBLE FOR GRATUITY IF I LEAVE THIS JOB

    1. Mohammad Ali says

      Yes Yathish, you’re eligible for gratuity.

  36. kalpesh b barot says

    i have been given 12 month contract from my employer and i have finished 4 years and 6 months with the same employer should i get gratuity at this stage or only after completion of 5 years of my job?

    1. Mohammad Ali says

      You are not eligible for gratuity because in 5th year you have not worked for 240 days.

  37. sumit says

    I had completed 4 year and 10 month in current organisations. Should I get gratuity if I leave job in this month?

    1. Mohammad Ali says

      No, It is payable for continuous service of five years or more on his termination of employment, superannuation, retirement or resignation.

  38. KUNAL PANDA says

    Hi
    If i have served 4 year and 8 months, am i eligible for gratuity?

    1. Mohammad Ali says

      4 years and 8 months ( 240 days = 1 year) where the company follows 5 day a week is eligible for gratuity.

  39. suresh says

    is it true that maximum year will be calculated only 33 irrespective of years served

    1. Mohammad Ali says

      Hi Suresh, No maximum limit for the service period, but if the amount exceeds Rs.10 lakhs, he is leigible only for 10 lakhs as Gratuity

  40. naveen says

    hi sir now i am working in a company for past 18months am i eligible for gratuity
    they are collecting sum amount from my salary

    hiw to i claim for after resigned my job

    1. Mohammad Ali says

      Hi Naveen,
      You will be eligible only after completing five years of continuous service with the same company or in the case of termination of your employment after rendering continuous service for not less than five years.

  41. vinay says

    is conveyance allowance and special allowance are considered while calculating gratuity ??

    1. Mohammad Ali says

      Hi Vinay,
      Only your Basic Salary + Dearness Allowance will be considered while calculating gratuity.

  42. Ashish Jain says

    Is the employee entitled for gratuity if he is the only employee in the shop. ?
    Please suggest ?

    1. Mohammad Ali says

      Yes, only when shop or establishment within the meaning of any law in which ten or more persons are employed

      1. D. k. suthar says

        Hi sir hi was join in 02/07/2012 and I was resine on 12//04/2017
        Can I eligible for the grajuty?

      2. Mohammad Ali says

        Hi Suthar, Anyone with more than 4 years and 6 months are eligible to get Gratuity. You have completed 4 years and 9 months, the period for gratuity calculation would be 5 years for you.