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Gratuity = 1 month basic salary × years of service · Section 53, Labour Act 2074
| Year | Per-Year Gratuity | Cumulative Total | Tax-Free | Taxable |
|---|---|---|---|---|
| Enter salary and years of service to see breakdown | ||||
Gratuity is an end-of-service benefit mandated by Nepal Labour Act 2074 (Section 53). Employers are legally required to pay gratuity to employees who have completed at least 1 year of continuous service upon termination, resignation, or retirement.
The standard rate is 1 month's basic salary for every completed year of service. Some employers apply the "6+ months counts as a full year" rule for partial years — this calculator lets you choose between both methods.
*Consult IRD Nepal or a tax professional for your specific situation. Rules may be updated by the Government of Nepal.
Gratuity in Nepal is an end-of-service payment required under Section 53 of Labour Act 2074. It is a lump-sum benefit an employer must pay when an employee leaves after completing at least 1 year of continuous service — whether through resignation, termination, or retirement.
The formula under Nepal Labour Act 2074 is: Gratuity = Basic Monthly Salary × Complete Years of Service. Only the basic salary is used — allowances, bonuses, and other components are excluded. For a partial year, 6 or more months is often counted as a full year by many employers.
Under IRD Nepal rules, the first Rs. 5,00,000 of gratuity received is fully tax-exempt. Any amount above Rs. 5,00,000 is treated as regular income and taxed at the applicable income tax slab rate for that fiscal year.
An employee must have completed a minimum of 1 year of continuous service to be eligible for gratuity under Nepal Labour Act 2074, Section 53. If the total service period is less than 12 months, no gratuity is payable.
No. Employees registered under the Social Security Fund (SSF) do not receive a separate gratuity payment. The SSF scheme — funded by the employer's 20% contribution — absorbs the gratuity obligation. SSF members receive pension, medical, and accident benefits through the SSF scheme instead of a standalone gratuity payout.
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