Gratuity Calculator – Calculate Gratuity, Tax Exemption & Taxable Amount
The PlanMyReturns Gratuity Calculator helps you calculate how much gratuity you are eligible for, how much of it is tax-exempt, and how much becomes taxable, based on the latest Indian labour laws and tax rules.
This calculator is built for accuracy and clarity. It supports:
- Private and government employees
- Permanent and fixed-term employees
- Wage adjustment as per Labour Codes 2025
- Statutory ceilings and tax limits
What Is Gratuity?
Gratuity is a lump-sum payment made by an employer to an employee as a reward for long and continuous service.
It is governed by the Payment of Gratuity Act, 1972 and becomes payable when an employee:
- Retires
- Resigns
- Is terminated
- Becomes disabled
- Or in case of death (paid to nominee)
When Does an Employee Become Eligible for Gratuity?
Eligibility depends on the type of employment:
Permanent Employees
- Minimum 5 years of continuous service required
- (Except in case of death or disability)
Fixed-Term Employees
- Eligible after 1 year of service
- As per amended labour rules
The calculator automatically applies the correct eligibility rule based on your selection.
What This Gratuity Calculator Shows You
Using this calculator, you can instantly see:
- Total gratuity amount as per formula
- Wage used for calculation (Basic + DA or adjusted wage)
- Tax-exempt portion of gratuity
- Taxable portion of gratuity
- Statutory ceiling applied
- Clear breakup of exempt vs taxable amount
This is especially useful for tax planning at job change or retirement.
Salary Components Used in Gratuity Calculation
Gratuity is calculated on wages, not total salary.
Included:
- Basic Salary
- Dearness Allowance (DA)
Not Included:
- HRA
- Bonus
- Special allowances
- Incentives
However, under Labour Codes 2025, wage restructuring rules apply.
This calculator accounts for that.
Labour Codes 2025 – Wage Adjustment Explained
If Basic + DA is less than 50% of your total CTC, labour codes require wages to be adjusted upward.
What the calculator does:
- Checks your entered CTC (optional)
- If allowances exceed 50%, wage is adjusted to 50% of CTC
- Uses the adjusted wage for gratuity calculation
This makes the result future-proof and legally aligned.
Gratuity Calculation Formula
For employees covered under the Gratuity Act:
Gratuity = (Last drawn wage × 15 ÷ 26) × Years of service
Where:
- Wage = Basic + DA (or adjusted wage)
- 15 = Days of salary for each year of service
- 26 = Working days in a month
The calculator applies this formula automatically.
Gratuity Tax Exemption Rules
Gratuity tax exemption depends on three limits.
The lowest of the three is tax-exempt.
1) Actual gratuity received
2) Amount calculated as per formula
3) Statutory ceiling
Current Ceiling Limits:
- ₹20,00,000 – Private sector employees
- ₹25,00,000 – Central government employees
Any amount above the exempt limit becomes taxable income.
Gratuity Example
Suppose an employee earns ₹50,000 basic salary, no DA, and completes 10 years of service.
- Monthly wage: ₹50,000
- Gratuity = 50,000 × 15 ÷ 26 × 10
- Calculated gratuity ≈ ₹2,88,462
If gratuity received is ₹2,88,462:
- Tax-exempt: ₹2,88,462
- Taxable: ₹0
The calculator shows this split clearly.
How to Use the PlanMyReturns Gratuity Calculator
- Enter monthly Basic Salary
- Enter Dearness Allowance (DA)
- Select years of service
- Choose employee type (Permanent / Fixed-term)
- Select sector (Private / Central Government)
- Enter gratuity already received (if any)
- Optionally enter CTC for wage adjustment
- Click Calculate
You can share, download, or save the result.
Gratuity vs Other Retirement Benefits
Gratuity vs PF
| Feature | Gratuity | EPF |
|---|---|---|
| Nature | One-time payout | Monthly savings |
| Employer contribution | Yes | Yes |
| Tax benefit | Partial | Mostly tax-free |
Gratuity vs Leave Encashment
| Feature | Gratuity | Leave Encashment |
|---|---|---|
| Based on | Service length | Unused leave |
| Frequency | Once | Once |
| Tax rules | Separate limits | Separate limits |
Who Should Use This Calculator?
- Employees planning job switch
- People retiring soon
- HR professionals
- Tax planners
- Fixed-term employees
- Anyone checking gratuity tax liability
Why PlanMyReturns Gratuity Calculator Is Better
- Labour Codes 2025 compliant
- Supports fixed-term employees
- Wage adjustment logic included
- Private and government limits supported
- Clear exempt vs taxable split
- Shareable and downloadable reports
- No login required
frequently asked questions
Gratuity is partially taxable. Tax exemption depends on limits and employee category.
₹20 lakh for private employees and ₹25 lakh for central government employees.
Yes. Fixed-term employees are eligible after 1 year of service.
Yes. Basic salary and DA are included.
No. Gratuity is paid only once, at exit or retirement.
Only if eligibility conditions are not met or in cases of misconduct as per law.