What is the formula for gratuity calculation?
For employees covered under the Payment of Gratuity Act, 1972, gratuity is calculated as (Last drawn salary × 15 / 26) × Number of years of service. For employees not covered under the Act, the formula typically uses 15/30 instead of 15/26.
Who is eligible for gratuity?
An employee is generally eligible for gratuity after completing 5 years of continuous service with the same employer, though this condition is relaxed in cases of death or disablement.
Is gratuity taxable in India?
For employees covered under the Payment of Gratuity Act, gratuity is tax-exempt up to ₹20 lakh (statutory cap). For employees not covered under the Act, the exemption limit is up to ₹10 lakh. Amounts above these limits are taxable as income.
What counts as 'last drawn salary' for gratuity?
Last drawn salary usually means Basic Pay plus Dearness Allowance (DA) at the time of leaving the organisation — it typically excludes bonuses, commissions and other allowances.