Gratuity Calculation For ₹56,000, ₹72,000 & ₹84,000 Salaries After 8 Years & 8 Months Of Service

If you’re approaching the five-year mark in your current job, it’s a good time to understand what gratuity benefits you may be eligible for. As per the Payment of Gratuity Act , 1972, any employee who has completed five or more years of continuous service in an organisation with at least 10 employees may qualify for a one-time gratuity payout. This is especially beneficial for those completing close to a decade of work, as even partial years beyond six months are considered full years in gratuity calculations. Here’s how your gratuity could be calculated for three salary levels after 8 years and 8 months of service.

What Makes an Employee Eligible for Gratuity?

According to experts, gratuity becomes payable under several common circumstances:

• Upon retirement, either on reaching the age of superannuation or by voluntary choice

After resignation, provided at least 5 continuous years of service have been completed

In the case of disability or death (in which case, the 5-year rule is waived)

When an employee is laid off or their role is made redundant under qualifying conditions

In any case, the minimum eligibility across most regular cases begins with five years of uninterrupted service under a legally qualifying employer.

How Is Gratuity Calculated?

The formula prescribed under the Gratuity Act is simple:

Gratuity = (Last Drawn Salary × Number of Years of Service × 15) ÷ 26

Here’s what each part means:

• Last Drawn Salary typically includes basic salary and dearness allowance (DA), if applicable
  
  
  
• Number of Years of Service is rounded to the nearest full year, where 6 months or more is considered a complete year
  
  
  
• 15 represents 15 days’ wages for every year of service
  
  
  
• 26 refers to the number of working days in a month (excluding Sundays)

This standardised method ensures fair calculation across eligible employees.

Example 1: Salary of ₹56,000 With 8 Years and 8 Months of Service

Let’s say an employee earns ₹56,000 as basic salary and has worked for 8 years and 8 months. Since the tenure crosses 6 months in the final year, the total service period is rounded up to 9 years.

Using the formula:
Gratuity = (56,000 × 9 × 15) ÷ 26 = ₹2,90,769 (approx.)

So, an employee in this income bracket could expect close to ₹2.9 lakh as a one-time gratuity amount.

Example 2: Salary of ₹72,000 With 8 Years and 8 Months of Service

For someone earning ₹72,000 as the last drawn basic salary, the same 9-year rule applies.

Gratuity = (72,000 × 9 × 15) ÷ 26 = ₹3,73,846 (approx.)

This means the eligible employee could receive over ₹3.7 lakh at the end of their service period.

Example 3: Salary of ₹84,000 With 8 Years and 8 Months of Service

If your basic salary is ₹84,000 and your tenure is 8 years and 8 months, the service period again becomes 9 years.

Gratuity = (84,000 × 9 × 15) ÷ 26 = ₹4,36,153 (approx.)

That brings your gratuity to over ₹4.36 lakh, offering a helpful financial cushion at retirement or exit.

Can a Company Opt Out of the Gratuity Act?

According to the law, any organisation that meets the eligibility criteria—i.e., employing at least 10 people—is bound by the Payment of Gratuity Act, 1972. They cannot choose to opt out of it. Companies are legally obliged to disburse gratuity payments to qualifying employees when applicable.

Also, even if the company’s headcount temporarily falls below 10 after meeting the condition once, the obligation continues permanently.

What You Should Keep in Mind

• Service Gaps Matter: Breaks in employment, if not legally sanctioned, may affect eligibility
  
  
  
• Check What Counts as 'Salary': Only basic salary and DA are considered in gratuity, not full CTC
  
  
  
• Timing Matters: If you leave at 8 years and 5 months, you’ll be counted as having 8 years; at 8 years and 6 months, you’ll be counted as 9

Gratuity Is Tax-Free Up to a Limit: As per current Indian tax laws, gratuity received under the Act is tax-exempt up to ₹20 lakh

Final Thoughts

Understanding gratuity is essential for any employee planning their financial future. While it may seem like a technical topic, the actual calculation is straightforward and the benefits can be significant—especially with longer service and higher salaries. According to experts, planning your resignation or retirement timing can make a visible difference in what you take home as gratuity.

So if you’re nearing a service milestone, consider holding on a few extra months to unlock the next slab of benefits.

Disclaimer: This article is intended for informational purposes only and should not be treated as legal or financial advice. Please consult a qualified HR professional or financial advisor for personalised guidance based on your employment contract and salary structure.