Gratuity Calculation: How Much Gratuity Will You Get on Resignation?

Gratuity is a lump-sum payment your employer gives you when you leave a job after completing at least five years of continuous service. Here is how to calculate it.

What Is Gratuity?

Gratuity is a statutory benefit under the Payment of Gratuity Act, 1972. Any employee who completes five years of continuous full-time service with the same employer is eligible.

The Gratuity Formula

Gratuity = (Last drawn salary x 15 x Completed years of service) / 26

Last drawn salary = Basic pay + Dearness Allowance (DA)

Example: Basic 50,000 + DA 10,000 = 60,000. After 10 years:

(60,000 x 15 x 10) / 26 = 3,46,154

Step-by-Step Calculation

1. Add your basic salary and DA
2. Multiply by 15
3. Multiply by completed years of service
4. Divide by 26

Use the Gratuity Calculator to get this instantly without doing the math.

Tax Exemption Under Section 10(10)

The gratuity you receive is tax-free up to a limit. Under Section 10(10), the lower of these is exempt:

• The actual gratuity you received
• The notified limit (currently 20 lakh)

Anything above the exemption is taxable as per your income slab.

Eligibility Rules

| Condition | Requirement |
|-----------|------------|
| Minimum service | 5 continuous years |
| Coverage | Companies with 10+ employees |
| Not applicable | Voluntary resignation before 5 years |

If you resign before 5 years you usually do not get gratuity, though some companies offer it as a special benefit.

Gratuity on Death or Disability

If an employee dies or becomes disabled before completing 5 years, gratuity is still payable to them or their nominee.

Don't Rely on Guesswork

Before you resign or negotiate your settlement, check your exact gratuity amount with the free Gratuity Calculator. Also plan your total payout and tax with the Salary Calculator so there are no surprises at the time of exit.