Gratuity Explained: Your 5-Year Payout

Most people clock 5 years at a job and feel nothing but relief. But that milestone legally entitles you to gratuity — a lump sum from your employer, separate from your salary and PF.
The formula: (Last drawn basic + DA, or dearness allowance) × 15/26 × years of service. So someone with a ₹40,000 basic salary and 7 years of service gets roughly ₹1.61 lakh.
This money is tax-free up to ₹20 lakh for most salaried employees.

What this means for you

• You don't need to ask for it — it's owed under the Payment of Gratuity Act, 1972, once you cross 5 years.
• A ₹50,000 basic salary with 10 years' service means roughly ₹2.88 lakh coming to you on exit.
• Job-hopping before year 5 means you walk away with zero gratuity — timing your exit matters.

What you can do

• Check your latest payslip for your basic + DA, and calculate your current gratuity estimate today.
• If you're near the 5-year mark and considering a switch, wait it out if the gap is just a few months.

It's easy to forget money you haven't seen yet — but this is yours, quietly building in the background.

Grow with clarity 🌱