Gratuity Calculator

Who Qualifies

• Five years of continuous service with the same employer is the normal qualifying period
• The five-year test is waived if service ends through death or permanent disablement
• The Act binds establishments that employed 10 or more people on any day in the preceding 12 months
• Once an establishment is covered it stays covered even if headcount later drops below 10
• Several High Courts have read 4 years and 240 days as five years, though this is not settled nationally

Why 26 and Not 30

The Act treats a month as 26 working days because the four Sundays are unpaid rest days. Dividing monthly pay by 26 therefore gives a higher daily wage than dividing by 30, and 15 of those days is roughly 57.7% of a month's salary rather than 50%. That single difference makes a covered employer's gratuity about 15% larger than an uncovered employer's on identical pay and service.

How It Is Taxed

• Government employees receive gratuity completely free of tax under section 10(10)(i)
• Everyone else gets the lowest of three figures exempt: the amount received, the statutory formula amount, and the lifetime cap
• The cap rose from ₹10,00,000 to ₹20,00,000 with effect from 29 March 2018
• Any excess is taxed as salary income in the year you receive it
• Gratuity paid to a nominee on the employee's death is treated far more favourably; take advice on that case

Getting Paid on Time

• The employer must pay within 30 days of gratuity becoming payable, whether or not you apply
• Delay beyond 30 days attracts simple interest at the notified rate for the whole delay period
• File Form I with the employer and keep a dated acknowledgement; escalate to the Controlling Authority if ignored
• Nominate in Form F early so a claim is not held up later
• Gratuity can be forfeited wholly or partly only for wilful damage, riotous conduct or an offence involving moral turpitude committed during employment