Gratuity is a monetary benefit given by an employer to an employee for the services rendered to the organization. It is a part of the salary that is received by an employee from his/her employer in gratitude for the services offered by the employee in the company.

As per the Payment of Gratuity Act, 1972, an employee becomes eligible for gratuity if he/she has completed at least 5 years of continuous service with the employer. In case of death or disablement, the 5-year condition is waived.

The formula for calculating gratuity is: (15 × Last drawn salary × Number of years of service) ÷ 26. Last drawn salary includes basic salary and dearness allowance. The service duration is calculated precisely, including both years and months of service, for more accurate gratuity calculation.

Gratuity received by government employees is fully exempt from tax. For non-government employees, gratuity is exempt up to ₹20 lakhs under section 10(10) of the Income Tax Act. Any amount exceeding this limit is taxable as part of your income.

Yes, you are eligible for gratuity if you have completed at least 5 years of continuous service with your employer, regardless of whether you resign, retire, or are terminated (except in cases of termination due to misconduct).