Gratuity is a monetary benefit provided by an employer to an employee for their long-term service. It is a token of appreciation paid at the time of retirement, resignation, or termination.

What is the eligibility for gratuity?

An employee is typically eligible for gratuity after completing 5 years of continuous service with the same employer. However, this 5-year rule is waived in case of death or disablement.

In India, gratuity for government employees is fully tax-exempt. For private sector employees, gratuity up to ₹20 Lakhs is exempt from income tax under Section 10(10).

Gratuity Calculator — Estimate Your Payout

A Gratuity Calculator is a financial utility used to estimate the amount of gratuity an employee is entitled to receive from their employer upon leaving a job. Use OrangeTool to project your retirement benefits with 100% privacy and accuracy—no salary data is ever uploaded.

Last Drawn Monthly Salary (Basic + DA) (₹)

Years of Continuous Service ✅ You are eligible for gratuity (min 5 years).

🏛️ Standard — uses the Payment of Gratuity Act (15/26) formula 🔒 100% Private — your income data stays on your device 📊 Detailed — see exactly how your payout is calculated 📅 Last updated: May 2026

What is Gratuity and How Does it Work?

Gratuity is a statutory benefit provided by the employer to an employee as a mark of appreciation for their dedicated service over several years. It is a critical component of retirement planning. In most countries, including India, it is governed by specific laws like the Payment of Gratuity Act, 1972. It is typically paid as a lump sum at the end of employment, whether that end comes due to retirement, resignation, or termination.

The 5-Year Continuous Service Rule

The most important rule regarding gratuity is the "Continuous Service" requirement. To be eligible for a gratuity payout, an employee must have completed at least **five years** of service with the same employer. If you leave your job after 4 years and 11 months, you technically lose your right to gratuity. However, there is one exception: if an employee's service is terminated due to death or permanent disablement, the 5-year rule is waived, and the gratuity is paid to the employee or their nominee.

How is Gratuity Calculated?

The formula for gratuity is designed to reward tenure. For employees covered under the Act, the standard formula is:

Gratuity = (Last Drawn Salary * 15 * Tenure) / 26

In this formula, **Salary** includes your Basic pay and Dearness Allowance (DA). Any other components like HRA, medical allowance, or bonuses are usually excluded. The number **15** represents 15 days of salary, and **26** represents the number of working days in a month.

Privacy and Your Financial Future

Calculating your gratuity is the first step toward understanding your retirement corpus. This calculation involves sharing your current salary and your career history at a company. Many "career portals" and "financial advisors" offer free calculators just to capture this data and estimate your net worth. **OrangeTool values your privacy above all else.** Our calculator is built on "Local-First" technology. All math happens entirely in your browser. We don't track your salary, we don't know your tenure, and we don't save your data. Your financial future belongs to you, and we help you plan it securely.

Frequently Asked Questions

Is gratuity paid to interns?

No. Gratuity is typically only paid to "employees" as defined by the law. Interns or apprentices are generally not eligible for gratuity payments.

What happens if the company goes bankrupt?

Employees are considered 'preferential creditors.' In the event of liquidation, the gratuity and other employee benefits must be paid out before most other debts are settled.

Is there an upper limit on gratuity payouts?

According to the Payment of Gratuity Act, the maximum tax-exempt gratuity an employer is *required* to pay is ₹20 Lakhs. Employers can choose to pay more as a 'voluntary' gratuity, but that excess amount would be taxable.