Live 5-year cliff check for Indian Act gratuity - so years on the job are not mistaken for a vested lump sum you can walk away with today.
Educational estimate only. Not legal, tax, or HR advice - and not your EPF balance.
By Ahmet C. Toplutaş·Site owner & editor · Finance & employee benefits
Last updated May 21, 2026 · Reviewed May 21, 2026 · Planning estimates only - not tax, medical, or investment advice
01
Under the Payment of Gratuity Act, covered employees generally need five years of continuous service before a resignation or retirement claim vests. Running the 15/26 formula at 4 years 6 months produces a notional number on paper - it does not produce a walk-away balance if you quit tomorrow. The cliff gate in the panel makes that gap explicit: leave today vs stay to vest.
HR systems may show “gratuity accrued” for planning; legal eligibility still turns on tenure rules, coverage, and last-drawn salary definitions. Death and disablement claims follow different paths not modeled here. Use this page for the quit-timing question - “what do I forfeit if I switch this quarter?” - not as a substitute for an HR letter or controlling authority ruling.
Decision framing: “What do I forfeit if I switch this quarter?” - not “What does the formula print for my current tenure?” Near the cliff, months matter as much as lakhs on a spreadsheet.
02
For Act-covered establishments, planning math usually starts with last-drawn Basic + DA, fifteen days’ wages for each completed year of service, using a 26-day month convention. Fractional years and rounding rules in payroll can shift the final rupee - confirm with HR how completed years are counted.
Private-sector conversations often stop at a statutory ceiling of ₹20 lakh. Long tenure with high Basic+DA can hit the cap while the uncapped formula still climbs. The panel flags cap vs uncapped so you see whether tenure or salary is the binding limit.
“Last drawn” salary can exclude variable pay, allowances, or include different DA snapshots depending on policy. Tax treatment of gratuity also depends on employer type and exemption limits - use the income tax calculator for sketching liability, not this cliff check alone.
03
Employee Provident Fund contributions, employer match, UAN transfers, EPS pension shares, and VPF top-ups live on a different ledger from gratuity. Gratuity is the employer lump sum tied to tenure under the Act (or a contractual substitute in non-covered shops). Confusing the two leads to bad job-switch math - you might count PF you can withdraw while ignoring gratuity you have not vested.
EPFO passbook balances update with every contribution; gratuity often sits invisible until exit or retirement. If you need corpus growth, withdrawal timing, or pension estimates, use retirement and compound-interest tools plus your passbook - not this page.
Rule of thumb: PF answers “what did I save in the fund?” Gratuity answers “what lump sum does tenure unlock at exit?” Only the second has a five-year cliff on voluntary quit for covered employers.
04
Act-covered employers use the 15/26 path with the cliff and ceiling behavior modeled in the panel. Non-covered establishments may still pay gratuity by contract, award, or local practice - a common planning stand-in is half a month’s wages × years of service. Toggle coverage to compare sketches; your appointment letter and state rules win over either default.
Establishment size, industry notifications, and contract overrides can change coverage without changing your tenure counter. If HR says you are covered, trust that flag over this toggle; use the toggle only when exploring “what if my shop were not on the Act?”
05
Career presets reproduce these cases. Amounts round to whole rupees; your panel may format with Indian grouping.
Example A · Near the cliff. Preset: Near the cliff · Basic ₹55,000 · DA ₹8,000 · 4y 3m · Act covered.
Salary base = ₹63,000 · Tenure ≈ 4.25 yr · Uncapped formula ≈ 63,000 × 15 × 4.25 ÷ 26 ≈ ₹1,54,000 - but leave today = ₹0 (not vested). Stay to 5y → ≈ ₹1,82,000 · ~9 months to cliff on the gate.
Example B · Just vested. Preset: Just vested · Basic ₹60,000 · DA ₹10,000 · 5y 0m.
Salary base = ₹70,000 · Gratuity ≈ 70,000 × 15 × 5 ÷ 26 ≈ ₹2,02,000. Leave today and stay-to-vest converge - the cliff gate is open.
Example C · Cap stress. Preset: Cap stress · Basic ₹1,80,000 · DA ₹40,000 · 18y.
Uncapped formula ≈ ₹22.8 lakh · statutory ceiling → payout sketches at ₹20 lakh. Tenure keeps climbing in the formula, but the cap binds - watch the panel flag, not the raw multiple.
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This cliff check sketches Act-style gratuity for job-switch timing. It does not replace payroll, tax filing, dispute resolution, or long-horizon retirement modeling.
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Under the Payment of Gratuity Act, 1972, continuous service of at least 5 years is generally required before gratuity becomes payable on resignation or retirement. Service short of that cliff usually means the formula amount is not a claim you can walk away with today - death or disablement are the main statutory exceptions. The cliff gate shows forfeit-today vs unlock-at-vest on purpose.
No. EPF is a monthly contribution corpus (employee + employer shares, UAN, EPS split). Gratuity is a separate lump-sum employer payment tied to tenure under the Gratuity Act. This page estimates gratuity - not your PF balance or monthly 12% contributions.
For establishments covered by the Act, the common planning formula is (last drawn Basic + DA) × 15 × completed years of service ÷ 26. Private-sector payouts are often discussed with a statutory ceiling of ₹20 lakh - confirm current rules and last-drawn salary definitions with HR or counsel.
Many non-covered employers still pay a contractual or custom amount - a common planning sketch is half a month’s wages × years of service. That is not the Act formula. Switch the coverage toggle to compare, then verify your appointment letter or HR policy.
Eligibility and “completed year” rounding follow the Act and case practice - including continuous-service rules that can treat certain periods as a completed year. This tool uses decimal years you enter as a planning input. Near the cliff, get an HR confirmation rather than relying on a web estimate alone.
No. It is an educational estimate for career timing and benefits literacy. Tax treatment of gratuity, government vs private rules, and disputes belong with a qualified advisor, your employer, or the controlling authority under the Act.
LIVE CLIFF CHECK
Years ≠ vested ↓Career presets
Coverage
Updates live. Years served ≠ vested claim. Gratuity estimate - not your EPF balance.
If you leave today
₹0 vested
~9 mo to the 5-year cliff · formula sketch at vest ₹1,81,731
CLIFF GATE · LEAVE TODAY VS STAY TO VEST
~9 months short of a typical vested claim
LEAVE TODAY
₹0
Under cliff · not a walk-away claim
STAY TO 5 YRS
₹1,81,731
Unlock sketch at the cliff (same salary)
Switching before the cliff can forfeit roughly ₹1,81,731 of sketched gratuity - weigh that against any CTC bump on the new offer.
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