What is Gratuity?

Gratuity is an amount paid to the employee as a token of appreciation. However, it is payable to only those employees who have served an organisation for 5 or more years. If an employee becomes disabled due to an accident or disease, he/she may receive the gratuity amount before completing 5 years. In this article, let’s understand the eligibility criteria, gratuity calculator online, formula to calculate gratuity, and more.

Eligibility Criteria to Receive Gratuity

Here are the eligibility criteria for receiving gratuity:


  • He/she should be an employee earning wages from a company.

  • The employee must have offered continuous service of 5 years at the least.

  • The employee should have resigned or retired.

  • The employee is eligible for superannuation.

What is a Gratuity Calculator?

A gratuity calculator is an online tool that estimates the gratuity amount receivable at the time of retirement or resignation. To calculate gratuity online, you must keep details like last drawn salary (basic + DA) and completed employment period with the organisation handy. The employee gratuity calculator will instantly calculate your gratuity amount.

What is the Formula to Calculate Gratuity?

Let’s understand the gratuity calculator formula 2021.

According to the Payment of Gratuity Act, anyone covered under this Act must use the below formula to calculate gratuity:


Gratuity = n*b*15/26




  • ‘n’ is equal to the tenor of service rendered to a company

  • ‘b’ is equal to the last drawn basic salary + dearness allowance


So, let’s say your last drawn salary is Rs. 1,20,000 and your tenor of service is 10 years. Taking the above formula into consideration, your gratuity is = 1,20,000 x 10 x 15/26

= Rs. 6,92,308


Now, the formula to calculate gratuity if an employee is not covered under the Payment of Gratuity Act is (15 x your last drawn salary x the working tenor) / 30.


Let’s say your last drawn salary is Rs. 90,000 and your tenor of service is 10 years. Your gratuity is = (15 x 90,000 x 10) / 30

= Rs. 4,50,000


Since manual calculations are prone to errors, it is best to make use of the retirement gratuity calculator online.

How to Use the Gratuity Calculator Online?

Here’s how you can calculate gratuity online using this tool:


  • Enter your last drawn salary (basic + DA)

  • Enter your tenor of service with the company

The online gratuity calculator will estimate your receivable gratuity within seconds.

Benefits of Using a Gratuity Calculator Online

Here are a few benefits of using an online gratuity calculator:


  • Helps you determine the accurate gratuity amount

  • Time-efficient

  • You can use it for free

  • Eliminates the possibility of miscalculation

  • Can be used any time, anywhere

Taxation Rules for Gratuity

If you are an employee who is covered under the Payment of Gratuity Act and working in the private sector needs, the least of the following is exempt from tax:


  • Rs. 20 lakh

  • Gratuity received

  • The eligible gratuity


The maximum income tax exemption on gratuity is Rs. 20 lakh.


Note: Government employees, both State and Central are fully exempt from income tax on gratuity.

Quick Links

Add the Quick Links present on the following page - https://www.bajajfinservmarkets.in/markets-insights/income-tax.html

FAQs on Gratuity Calculator

No, an apprentice is not entitled to gratuity.

Here’s how to use gratuity amount calculator online:


  • Visit our ‘Gratuity Calculator’ page

  • Enter your last drawn pay (basic + DA)

  • Include your tenor of service


The calculator will determine the gratuity amount you are entitled to.

The gratuity calculator formula for employees covered under the Payment of Gratuity Act, 1972 is n*b*15/26. However, if you are not covered under this act, the formula is (15 x your last drawn salary x the working tenor) / 30.

Income tax exemptions on gratuity are limited to Rs. 20 lakh.

Using a gratuity calculator offers the following benefits:


  • Time-efficient

  • Accurate calculation

  • Accessible at any time, anywhere


Happy Customers of Bajaj Markets

Valene Gomes
Getting a loan to take care of my wedding and relieving my parents to enjoy the occasion was the best decision I ever made. Easy-to-apply, amazing interest rate and quick disbursal, what more can one ask for!
Vinamra Jain
I am passionate about the vehicle I drive and hence I wan't to protect it with the best available option. What amazed me about Bajaj Finserv Markets was full transparency, quick quotes and the attractive discount on the premium while choosing annual payment option!
Shehnaz Patel
My husband and I will finally move into our own house this Diwali. All thanks to Bajaj Markets, with competitive interest rates, minimal processing fees and easy to repay EMIs, our dream saw the light of reality in no time!
Brijesh Mishra
Kids grow up fast and to fulfill their dream trip to Disneyland I had everything but instant funds. With no collateral or guarantor required and a hassle-free processing, I gifted my family a memorable trip to Paris just at the click of a mouse!
Chandni Arora
The best way to start looking for health insurance is not a 60 minute meeting with an insurance sales person but with a close study of my coverage needs and checking the insurance company's claim ratio. No unnecessary jargons, easy to apply claims process and choice of premiums, what else could I have asked for as a newbie!
Anurag Pandit
I bought my first iPhone using my Bajaj Finserv EMI Network Card. Zero downpayment, No cost EMI on Bajaj Finserv Markets EMI store and the smile on my dad's face just made my day!
Download App
Credit Score