Gratuity Calculator (2025) – Free Excel Download
In countries like India, UAE, and Qatar, gratuity is an important employee benefit that is paid by the employer after an employee completes a minimum of 5 years of continuous service. This payment is a way to show appreciation for long-term dedication to the organization. The process to calculate gratuity amount is not only simple but can be done efficiently using an Excel formula. Whether you’re a business owner or an employee, understanding how to apply the gratuity calculation formula for 2025 can be incredibly useful.
In this article, we will learn how to use the gratuity calculator and the Excel tool to easily calculate the gratuity for different employees in various sectors. We’ll also provide a few examples to demonstrate the gratuity calculation method step by step. With the right understanding, gratuity calculation can be done in a matter of minutes, ensuring that both employer and employee are on the same page when it comes to benefits after 5 years of working.
What is Gratuity & What is Eligibility for Gratuity?
Gratuity is a statutory benefit paid by employers to employees as a gesture of appreciation for their long-term service. It is typically calculated based on an employee’s last drawn salary and the number of years of service. According to the Payment of Gratuity Act, 1972, all employees in India, regardless of their job roles, can be eligible to receive gratuity benefits, provided they meet certain conditions.
To be eligible for Employees Gratuity Benefit Amount, an employee must have completed 5 years of continuous service with the same company. Gratuity becomes payable upon retirement, termination, or employment cessation after meeting this 5-year requirement, and the gratuity benefit amount is then calculated using a specific formula.
What is Gratuity Formula (2025)?
The gratuity formula is designed to calculate the gratuity an employee is entitled to after completing a minimum of 5 years of continuous service with an employer. According to the Payment of Gratuity Act, 1972, this statutory benefit is based on the employee’s last drawn salary and the number of years of service.
For employees to be eligible for the Employees Gratuity Benefit Amount, they must meet the conditions laid out by the Act. Once these requirements are fulfilled, gratuity becomes payable upon retirement, termination, or the end of employment. The gratuity benefit amount is calculated based on the specific formula, considering the continuous service with the same company.
How is Gratuity Benefit Amount Calculated (2025)?
To calculate the gratuity amount, the 15-26 Gratuity Formula is often used. This formula takes into account the employee’s last drawn salary, the number of years of service, and is specifically designed for employees covered under the Gratuity Act. The formula calculates the gratuity amount by multiplying the salary with 15 days of pay for each year of service, and dividing it by 26 (the number of working days in a month).
This method ensures that gratuity is accurately calculated according to the Gratuity Act and provides employees with their entitled benefits after completing the required continuous service.
Gratuity Amount = Last Drawn Salary x 15/26 x No. of Completed Years of Service
Gratuity Calculator (2025) – Free Excel Download
Is Gratuity Amount Taxable in India (2025)?
An important question that often arises is whether Employee’s Gratuity Benefit is taxable in India. According to the gratuity rules, the gratuity amount is generally taxed under income tax laws if received during an employee’s service.
However, there are tax exemption rules that apply when the gratuity is received during retirement, death, or superannuation. For Government Employees, the entire gratuity amount is exempted from income tax. On the other hand, private sector employees can enjoy tax exempted gratuity only up to a Statutory limit of Rs 20 Lakh. If the gratuity exceeds this limit, it becomes taxable.
For example, if an employee receives Rs 12 lakh as gratuity benefit but is eligible for only Rs 9 Lakh according to the Gratuity 15/26 Formula, the tax-free gratuity is limited to Rs 9 Lakh, and the remaining Rs 3 lakh would be subject to income tax. This applies under the Payment of Gratuity Act, 1972.