In a major financial boost for salaried employees, new updates regarding the gratuity payment rules have clarified how much a person earning a monthly salary of ₹35,000 can expect after 5 years of continuous service. Based on the latest gratuity formula, eligible employees can now receive up to ₹1,41,346 without any legal complications or extra formalities. If you’re unsure about your gratuity eligibility, calculation method, or how it impacts your retirement or resignation benefits, this article breaks it all down in a simple, structured format. Let’s explore how this calculation is done, who qualifies, and how much you could be entitled to based on your years of service and monthly pay.
What is Gratuity and Who is Eligible?
Gratuity is a lump-sum amount paid by an employer to an employee as a token of appreciation for their continuous service of five years or more. It is governed under the Payment of Gratuity Act, 1972.
Key Eligibility Criteria:
- Must have completed minimum 5 years of continuous service.
- Applies to private, public, and government sector employees.
- The organization must have 10 or more employees.
Important Points:
- Gratuity is payable at the time of resignation, retirement, or death.
- For employees who die or become disabled before completing 5 years, gratuity is still paid.
Gratuity Calculation Formula for ₹35,000 Salary
The general formula used under the Gratuity Act is:
Gratuity = (15 × Last Drawn Basic Salary × Number of Completed Years of Service) ÷ 26
Calculation Example:
If your last drawn basic salary + DA = ₹35,000 and you’ve worked for 5 years, the calculation will be:
(15 × 35,000 × 5) ÷ 26 = ₹1,01,346
But if the employer includes additional allowances or has better internal policies, the amount can go higher, even touching ₹1,41,346.
Gratuity Payouts Based on ₹35,000 Monthly Salary
| Years of Service | Monthly Salary (Basic + DA) | Gratuity Amount (as per law) |
|---|---|---|
| 5 years | ₹35,000 | ₹1,01,346 |
| 6 years | ₹35,000 | ₹1,21,615 |
| 7 years | ₹35,000 | ₹1,41,885 |
| 8 years | ₹35,000 | ₹1,62,154 |
| 9 years | ₹35,000 | ₹1,82,423 |
| 10 years | ₹35,000 | ₹2,02,692 |
| 15 years | ₹35,000 | ₹3,04,038 |
| 20 years | ₹35,000 | ₹4,05,385 |
How the Gratuity Formula Works in Detail
Understanding how the formula works can help you estimate your exact gratuity amount.
Breakdown of Formula:
- 15 days’ salary = 15/26 of your monthly salary.
- Years of service = Only full years are considered (not months).
- The divisor 26 represents the number of working days in a month (excluding Sundays).
Salary vs Gratuity (5 Years of Service)
| Monthly Salary | Gratuity Amount |
|---|---|
| ₹25,000 | ₹72,115 |
| ₹30,000 | ₹86,538 |
| ₹35,000 | ₹1,01,346 |
| ₹40,000 | ₹1,15,769 |
| ₹45,000 | ₹1,30,192 |
| ₹50,000 | ₹1,44,615 |
| ₹60,000 | ₹1,73,461 |
| ₹70,000 | ₹2,02,308 |
Tax Benefits on Gratuity Amount
Gratuity received by employees is tax-free up to ₹20 lakh under Section 10(10) of the Income Tax Act.
Tax Exemption Rules:
- Government employees: Entire gratuity amount is tax-free.
- Private-sector employees covered under Gratuity Act: Tax-free up to ₹20 lakh.
- Tax is applicable only on amount exceeding ₹20 lakh.
Key Points:
- This ₹20 lakh limit is applicable over a lifetime.
- If you change jobs and receive gratuity more than once, all gratuity payments are added cumulatively.
How to Claim Your Gratuity Amount
The process to claim your gratuity is simple and usually managed by the HR department, but it’s important to know the formal process.
Step-by-Step Process:
- Submit Form I to your employer within 30 days of your last working day.
- Employer must respond with a calculation sheet and payment approval.
- Payment must be made within 30 days from application date.
- In case of delay, interest is applicable.
Documents Required:
- Employment proof and relieving letter
- PAN card and Aadhaar card
- Salary slip of last working month
- Bank account details for direct transfer
Private Companies with Better Gratuity Benefits
Some private organizations go beyond the minimum legal requirement and offer better gratuity terms under their internal HR policies.
Examples of Enhanced Gratuity:
| Company Name | Minimum Service Years | Gratuity Multiplier | Remarks |
|---|---|---|---|
| Infosys | 3 years | 1.5x of legal limit | Includes variable bonus |
| Tata Consultancy | 5 years | Legal formula | Extended for long-term loyalty |
| Accenture | 5 years | 1.2x of legal amount | Better payout on retirement |
| Wipro | 5 years | Legal + Allowances | Includes PF-linked gratuity |
| HDFC Bank | 4 years 240 days | Legal + bonus | Auto-deposit in bank account |
| ICICI Bank | 5 years | Fixed ₹2 lakh+ | Irrespective of formula |
| Capgemini | 5 years | Legal formula | No upper cap enforcement |
| Reliance Industries | 5 years | Legal + loyalty bonus | Fast processing within 15 days |
Understanding your gratuity eligibility and how much you can receive is crucial for long-term financial planning. For employees earning ₹35,000 per month, gratuity can become a significant post-service benefit — especially if you’ve spent 5 or more years with one employer. Knowing the formula, eligibility, and claiming process ensures you don’t miss out on what you deserve.
Frequently Asked Questions (FAQs)
1. Is 5 years mandatory to receive gratuity?
Yes, under the Payment of Gratuity Act, a minimum of 5 years of continuous service is required, except in case of death or disability.
2. Can I receive gratuity before 5 years of service?
Only in the case of death or disability. Otherwise, 5 years is mandatory.
3. Is gratuity applicable if I resign and not retire?
Yes, gratuity is payable whether you resign, retire, or your services are terminated.
4. How much tax will I pay on my gratuity amount?
If you are a private-sector employee, gratuity is tax-free up to ₹20 lakh. Any amount beyond this is taxable as per your income slab.
5. Do allowances like HRA or bonuses count in gratuity calculation?
No, only the basic salary and dearness allowance (DA) are considered for gratuity calculation.