How to Calculate Gratuity

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What is Gratuity?

The term Gratuity refers to the amount that a person pays to their employee in return for their services to the company. Those employees who are have been employed by the company for more than 5years are given the gratuity amount. The person can get the gratuity before 5 years if they get disabled due to an accident or disease.

What is the eligibility for Gratuity?

The following are eligible for gratuity:-

  • You should be eligible for superannuation.
  • It would be best if you had retired from service.
  • It would be best if you had resigned after continuous employment of five years with the company.
  • In case of your death, the gratuity is paid to the nominee or you on disablement on account of a sickness or an accident.

How to Use the ClearTax Gratuity Calculator?

Follow these steps and calculate your gratuity using the ClearTax Gratuity Calculator:

  • You must enter the basic salary and the dearness allowance, if applicable, using the slider.
  • You then enter the number of years of service with the company.
  • The gratuity calculator would calculate the total gratuity amount payable to you in seconds.
  • You can recalculate the gratuity anytime by changing the input sliders.
  • The gratuity will be calculated instantly when you move the sliders.

Benefits of Using the ClearTax Gratuity Calculator

The ClearTax Gratuity Calculator is an easy-to-use generic tool, where you enter the basic salary and the years of service. It gives you an estimate of the gratuity you would receive after five or more years of continuous service.

The gratuity calculator shows you the gratuity figures in seconds. It helps you plan your finances by elegantly investing the gratuity for a maximum return.

You can use the gratuity calculator from the comfort of your home or practically anywhere to get the gratuity amount.

What are the Taxation Rules for Gratuity?

The TAX treatment for the gratuity depends on the type of employee who has to receive the gratuity. Some of the valid points regarding this are given below:-

  • The gratuity amount received by any government employee is exempt from the income.
  • The least of the following three amounts will be exempt from the income tax-

a) 20 Lakh

b) The actual amount of gratuity received

c) The eligible gratuity


How is gratuity calculated?

The gratuity amount depends upon the tenure of service and last drawn salary. Gratuity Calculation Formula=Number of completed years of service (n)*basic salary last drawn plus dearness allowance (b)*15/26. One can calculate their gratuity amount with the help of the following formula: Gratuity = n*b*15/26.

How many years of service is required for gratuity?

As per the Payment of Gratuity Act, 1972, one is entitled to get gratuity if they have furnished service continuously for a minimum of 5 years with a particular establishment or organisation.

✅ Can I get gratuity if I resign?

As per Gratuity Act, gratuity is payable only after the completion of 5 years of your service. Therefore, if you resign before 5 years of service, you are not eligible to get gratuity.