Question 1

Am I eligible for gratuity under Indian law?

Accepted Answer

Under the Payment of Gratuity Act, 1972, an employee is eligible for gratuity upon completing 5 years of continuous service with the same employer. Under judicial precedents (such as Madras High Court rulings), completing 240 working days in the 5th year (or 190 days for a 5-day work week) is treated as continuous service for the 5th year. The 5-year requirement is waived in case of death or permanent disablement.

Question 2

What salary components are considered for gratuity calculation?

Accepted Answer

Gratuity is calculated strictly on your Last Drawn Basic Salary plus Dearness Allowance (DA). Allowances such as House Rent Allowance (HRA), Special Allowance, Conveyance Allowance, Performance Bonuses, and OT pay are strictly EXCLUDED.

Question 3

How much gratuity will I lose if I resign before completing 5 years?

Accepted Answer

If you resign before completing 5 years (or 240 days in the 5th year), you forfeit 100% of your accrued statutory gratuity under law. For example, resigning at 4 years 6 months with a ₹1 Lakh Basic+DA salary forfeits approximately ₹2.88 Lakhs in gratuity.

Question 4

Is gratuity taxable in India?

Accepted Answer

For Central/State Government and Defense employees, gratuity is 100% tax-free under Section 10(10)(i). For private sector employees covered under the Act, gratuity up to ₹20 Lakhs is completely exempt from income tax under Section 10(10)(ii).

Gratuity Calculator (Government Rules)