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A gratuity calculator is a simple yet powerful financial tool that helps employees estimate the amount of gratuity they are entitled to receive from their employer after completing a certain period of service.
Understanding how gratuity is calculated and using a gratuity calculator can help employees plan their finances more effectively and avoid confusion at the time of retirement or resignation.
Table of Contents
What Is Gratuity?
Gratuity is a form of social security benefit provided by an employer as a token of appreciation for long-term service.
It is a lump-sum amount paid by an employer to an employee in recognition of their continuous service. In India, it is governed by the Payment of Gratuity Act, 1972
As per the act, any employee is entitled to get a gratuity benefit after 5 years of completion of continuous service with the company.
Please note that gratuity is a part of your CTC. That means, every month, your company is deducting a portion of your salary, and after 5 years, they pay it back.
You can use the take-home salary calculator to know how much you will get every month after deducting gratuity and other amounts from your CTC.
In case you don’t serve 5 years of service, the same money is forfeited by the company.
As per the rule in 2025, only fixed-term employees are entitled to get Gratuity after 1 year of service. For permanent employees, the existing rule is still valid.
Gratuity Eligibility Criteria
The employee must be a full-time employee (not a freelancer or consultant).
- A minimum of five years of continuous service with the same employer is usually required.
- The employee must be a full-time employee (not a freelancer or consultant).
- Gratuity becomes payable upon retirement, resignation, or termination only if the employee has completed 5 years of service
- In case of death, the gratuity is paid even without completing 5 years of service
Taxation On Gratuity
If you are a government employee, the full gratuity amount is tax-exempt. However, for private company employees, the gratuity amount of up to 20 lacs is exempted from tax.
What Is A Gratuity Calculator?
A gratuity calculator is an online tool that helps employees calculate the gratuity amount they are eligible to receive.
By entering basic details such as last drawn salary and years of service, the calculator provides an instant estimate of the gratuity payable.
How A Gratuity Calculator Works?
The rate at which gratuity is paid is as follows.
Gratuity Amount = (Last Drawn Basic Salary /26) X 15 X Number Of Years Of ServiceSo if your last drawn salary is Rs 50000 and if you have worked for 5 years, then the gratuity amount would be as follows.
Gratuity Amount = (50000/26)X15X5 = ₹1,44,230
How To Use The Gratuity Calculator?
To use the gratuity calculator, you just need to enter the last basic salary details and the number of years of service. The calculator then calculates the gratuity amount based on the formula discussed above.
Benefits Of Using A Gratuity Calculator
- Simplify complex calculations
- Provide quick and accurate estimates
- Help employees with financial and retirement planning
- Increase awareness about statutory benefits
- Free and easy to use.
Conclusion: Gratuity Calculator
A gratuity calculator is an essential financial planning tool for salaried employees. It brings clarity, transparency, and convenience to understanding one of the most important employee benefits.
By knowing how gratuity works and using a calculator to estimate the amount, employees can make informed career and financial decisions.
Whether you are just starting your career or nearing retirement, a gratuity calculator can help you better appreciate the long-term value of your service and plan for a more secure financial future.
