Simplest Way to know your Gratuity Amount

Simplest Way to know your Gratuity Amount

Know your Gratuity Amount and Calculation
Know your Gratuity Amount and Calculation

Simplest Way to know your Gratuity Amount

How to Calculate Gratuity Amount?

  • Last Drawn Salary (Basic and DA)*total No. of Years*15/26 would be total sum of Gratuity Amount. See the example below

  • X = Last Drawn Salary (Suppose INR: 10,000), Y = No. of Years Served (5 Years), 15 = Gratuity amount per Year & 26 = Days in a Month.

  • Total Gratuity amount would be: 10000*5*15/26 = 28846.15.

How much amount deduct from my Salary?

  • Simple deduction is 4.81% of Basic Salary.

What is the Ceiling or Maximum Amount of Gratuity?

  • Upper Limit or Ceiling amount is 10 Lacks (INR 10,00,00) as per Gratuity Act 1972 however now the upper limit has been enhanced up to 20 Lacks for all, after 7th Pay Commission applied in 2018.

  • Upper limit can be increased by the employer, however tax rebate can be availed only up to 20 Lacks

Is the Gratuity Amount Insured and Guaranteed by Government?

  • As per Gratuity Act 1972, Employer has to take a Compulsory Insurance from Life Insurance Corporation of India in order to provide Guarantee of the amount to the employees, working in the company.

  • Insurer may be changed with the due approval of the relevant Government.

  • Employer with having employee capacity more than 500 can make an 'Approved Gratuity Fund' approved by their relevant State or Central Government.

Who is bounded to provide Gratuity to their Employees?

  • Every Shop, Firm, establishment or company who has more than 10 employees or had more than 10 employees within past 12 months

What is the eligibility to get Gratuity?

  • All the Employees who have completed 5 years continuous service in any organization which has more than 10 workers.

When an Employee gets the Gratuity Amount? (Payment of Gratuity)

  • On his/her superannuation (retirement due to age) after at least 5 years of service.

  • On his/her Retirement or Resignation from the company after at least 5 years of Service.

  • Disablement due to an Accident or Disease - 5 years’ Service is not mandate

  • Death of an Employee - 5 years’ Service is not Mandate.

Who is liable to get the Gratuity Payment?

  • Self (Employee)

  • Nominee appointed by the employee

  • His/Her Heirs (If no Nominee is appointed)

  • Controlling authority - if Nominee/Heirs is minor then the Controlling Authority Invest or deposit the amount in Bank or financial institution for the benefit of the minor.

How to Calculate total tenure of Gratuity in year?

  • For the employees working underground like in Mines etc. - Working more than 190 days in a year would be considered one year.

  • For the employees working upper ground like in a company or production house - Working more than 240 days in a year would be considered as one year.

  • Post 5 Years of Service, if access service of at least 6 month completed, it will be counted as one complete year. For Example: If Employee retires after 66 Months from the service, it will be counted as 6 Years (5 years and 6 Month) however if it is 65 Month then total no. of years would be 5 years.

When can I appoint Nominee name in Gratuity database?

  • Employee who has completed one year can appoint one or more nominee  by filling a form as per Gratuity Act 1972, Section 4, Sub Section 1.

  • Nominee name can be Modified, Changed or Added at any time by employee as per sub section 3 and 4 by giving notice to his/her employer in prescribed form.

How fast employer will pay the Gratuity Amount?

  • 30 days from the retirement of the employee from the company.

  • If the said amount is not credited/Issued within 30 days, a simple interest specified by the government, will be added in Gratuity Amount.

  • If payment of the Gratuity Amount not made within 30 days by employer due to incomplete/incorrect information provided by the employee, no interest will be applied with the original amount.

Am I suppose to pay any Tax on Gratuity Amount?

  • No Tax will be charged for the amount up to 20 Lacks.

  • Tax will be applicable for the amount More than 20 Lacks (If Employer contribute more than 20 Lacks)

  • If an employee gets 16 Lacks from one company as a Gratuity Amount and later on 8 Lacks from 2nd company, Income tax will be charged for the amount more than total 20 Lacks (4 Lacks Taxable income in this case).

Why Companies provide Gratuity to their Employees?

  • As per Gratuity Act 1972, Employer has to pay mandate amount to those employees who have served in one company for more than 5 years continuously.

Simplest Way to know your Gratuity Amount

(Have more questions or facing any difficulty or dispute in getting Gratuity? Write to us in the comment field or mail us: and get specific solution(s) from our experts)


  1. This article is very informative

  2. Good information.... keep it up Bro

  3. Very nicely explained and in a very simple language which can easily be understood


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