How to Calculate Gratuity

Gratuity is a monetary benefit provided to employees after 5 years of continuous service in India, under the Payment of Gratuity Act, 1972.

Formula:

• Gratuity = (15 × Last Drawn Salary × Years of Service) ÷ 26
• 15: Days of salary paid for each year of service.
• 26: Average working days in a month.
• Last Drawn Salary = Basic + Dearness Allowance.

Example: If your salary is ₹30,000 and you worked for 10 years:

Gratuity = (15×30,000×10) ÷ 26 = ₹1,73,076 (approx).

Gratuity Eligibility:

• Minimum 5 years continuous service.
• On resignation, retirement, or death (no 5-year rule in case of death).

Benefits:

• Financial support after employment ends.
• Tax-free up to ₹20 lakh under Indian tax laws.