What is the gratuity calculation formula in India?+
For companies covered under Payment of Gratuity Act (10+ employees): Gratuity = (15 × Last Drawn Monthly Salary × Years of Service) ÷ 26. For companies NOT covered: Gratuity = (15 × Last Drawn Monthly Salary × Years of Service) ÷ 30. Salary here means Basic + Dearness Allowance only. The divisor 26 represents working days in a month (excluding Sundays).
What is the minimum service for gratuity eligibility?+
Minimum 5 years of continuous service is required for gratuity eligibility in India under the Payment of Gratuity Act. However, in case of death or disability, gratuity is payable even before 5 years. Note: If you've completed 4 years and 240 days (6 months more than 4 years), it counts as 5 years for gratuity purposes as per a Supreme Court ruling.
What is the maximum tax-free gratuity amount?+
Gratuity up to ₹20 lakh is completely tax-free for private sector employees. If gratuity exceeds ₹20 lakh, the excess amount is taxable as salary income. Government employees' gratuity is fully tax-exempt regardless of amount. The ₹20 lakh limit was last revised in Budget 2019 from ₹10 lakh.
Is gratuity paid at retirement or resignation?+
Gratuity is payable on: Superannuation (retirement), Resignation (after 5+ years), Death or permanent disability (before 5 years too), Retrenchment or layoff. Gratuity must be paid within 30 days of becoming due. After 30 days, the employer must pay 10% simple interest on the outstanding amount.
What if I resign before 5 years — do I lose gratuity?+
If you resign before completing 5 years of continuous service, you are not eligible for gratuity under the Payment of Gratuity Act. However, your employer may voluntarily pay ex-gratia (goodwill payment). In case of death or permanent disability, gratuity is payable even if service is less than 5 years.
Can an employer refuse to pay gratuity?+
An employer can only forfeit gratuity if the employee is terminated for: (1) Wilful omission or negligence causing damage to employer's property (only to the extent of actual loss), (2) Act of violence, riot, or moral turpitude. Resignation, retirement, or normal termination — employer CANNOT forfeit gratuity. If refused, file complaint with Controlling Authority under Payment of Gratuity Act.