Gratuity Calculator

Gratuity is a monetary benefit paid by an employer to an employee as a token of appreciation for their years of service. It is a lump-sum payment made when an employee leaves the organization after completing a minimum tenure. In India, it is governed by the Payment of Gratuity Act, 1972. In the UAE, it is called 'End of Service Benefits' under the UAE Labour Law. The purpose is to provide financial security to employees after retirement or resignation.

For employees covered under the Payment of Gratuity Act, 1972, the formula is: Gratuity = (15 × Last Drawn Salary × Tenure in Years) ÷ 26. Here, 'Last Drawn Salary' means Basic Salary + Dearness Allowance (DA). The number 15 represents 15 days' wages, and 26 represents the number of working days in a month (excluding Sundays). For employees not covered under the Act, some companies use 30 days instead of 26, resulting in a slightly lower amount.

In India, you must complete at least 5 years of continuous service to be eligible for gratuity. However, this 5-year rule is waived in cases of death or disability of the employee—the nominee or legal heir receives the gratuity regardless of tenure. Important: If you have worked for 4 years and 6 months or more, it is rounded up to 5 years, making you eligible. This tenure rounding rule (6+ months rounds to next year) applies to the entire calculation.

Gratuity received by government employees is fully exempt from income tax. For private sector employees covered under the Payment of Gratuity Act, the least of the following is tax-exempt under Section 10(10): (1) Actual gratuity received, (2) ₹20 lakhs (the current maximum limit), or (3) 15 days' salary for each completed year of service. Any amount exceeding this exemption limit is added to your taxable income and taxed at your applicable slab rate. For employees not covered under the Act, the exemption calculation differs slightly.

As of 2024, the maximum tax-free gratuity limit in India is ₹20 lakhs. This was increased from ₹10 lakhs in 2019. If your gratuity exceeds ₹20 lakhs, the excess amount is taxable. For example, if you receive ₹25 lakh gratuity, ₹20 lakh is tax-free and ₹5 lakh is added to your taxable income. Government employees have no such ceiling—their entire gratuity is tax-exempt regardless of the amount.

In the UAE, gratuity is called 'End of Service Benefits' under the UAE Labour Law. The formula is: For the first 5 years: 21 days' basic salary per year. After 5 years: 30 days' basic salary per additional year. Daily wage = Monthly salary ÷ 30. Important caps: Total gratuity cannot exceed 2 years' salary. You need minimum 1 year of service to be eligible. If you resign (not terminated), the amount may be reduced: less than 3 years = 1/3rd, 3-5 years = 2/3rd, 5+ years = full amount.

Under Saudi Labour Law, gratuity (EOSB - End of Service Benefits) is calculated as: For the first 5 years: 15 days' wages per year. After 5 years: 30 days' wages (full month) per additional year. You need minimum 2 years of service to be eligible. If you resign: 2-5 years = 1/3rd of entitlement, 5-10 years = 2/3rd, 10+ years = full amount. If terminated by employer, you get full amount. No cap on maximum gratuity unlike UAE.

The Payment of Gratuity Act, 1972 is mandatory for: (1) All factories, mines, oilfields, plantations, ports, and railway companies, (2) Shops and establishments with 10 or more employees on any day in the preceding 12 months. Once the Act becomes applicable (when employee count reaches 10), it continues to apply even if the count falls below 10 later. Companies not covered under the Act may still pay gratuity as per their internal HR policies, often using slightly different formulas.

Legally, you are not entitled to gratuity if you resign before completing 5 years of continuous service (in India). However, some companies have more generous policies and may pay pro-rata gratuity for shorter tenures. Always check your company's HR policy. If you have completed 4 years and 6+ months, the tenure is rounded up to 5 years, making you eligible. Also, if employment ends due to death or disability, the 5-year rule is waived.

Yes, under Section 4(6) of the Payment of Gratuity Act, an employer can forfeit gratuity partially or fully if the employee's services are terminated due to: (1) Riotous or disorderly conduct, (2) Any act of violence, (3) Any other act that constitutes an offense involving moral turpitude (if convicted). The forfeiture is limited to the extent of damage or loss caused to the employer. Note that gratuity is a statutory right—it cannot be forfeited for poor performance, resignation, or minor misconduct.