EPF vs Gratuity — How They Work Together in India (2026)
Both EPF (Employee Provident Fund) and gratuity are exit benefits you receive when leaving employment. But they work very differently — different eligibility, different formulas, different tax rules. This guide explains both clearly and compares them side by side.
If you searched for the difference between PF and gratuity, this page is meant to answer that exact question first, then show how both benefits work together in a real job.
EPF vs Gratuity: Side-by-Side Comparison
| Factor | EPF | Gratuity |
|---|---|---|
| Who contributes? | Employee + Employer (12% + 12%) | Employer only |
| Calculation base | Basic + DA | Basic + DA (min 50% CTC from 2025) |
| Minimum eligibility | Day 1 (mandatory if basic ≤₹15,000) | 5 years (permanent) / 1 year (FTC) |
| Payment timing | On exit / after 2 months unemployment | Within 30 days of leaving |
| Tax exemption | Tax-free after 5 continuous years | Tax-free up to ₹20 lakh (private sector) |
| Governing Act | EPF & MP Act 1952 | Payment of Gratuity Act 1972 |
| Accumulated as | Corpus (contributions + interest) | Lump sum at exit (employer funded) |
Difference Between PF and Gratuity
PF / EPF
PF is a running retirement account. Money goes in every month, earns interest, and builds into a corpus you can track through EPFO. Both you and your employer contribute.
Gratuity
Gratuity is not a monthly account. It is a one-time payment made by the employer when you leave, retire, become disabled, or die in service, provided the service rules are met.
The simplest way to think about the difference between PF and gratuity is this: PF is a contribution-based savings pool, while gratuity is a service-based reward paid at exit.
How EPF is Calculated
Employee Contribution = Basic + DA × 12%
Employer Contribution = Basic + DA × 3.67% (to EPF) + 8.33% (to EPS)
EPS = Employee Pension Scheme. EPS contributions are capped at ₹15,000 basic.
Your EPF corpus grows with both contributions + interest rate declared annually by EPFO (8.25% for 2024-25). Use the EPFO portal (epfindia.gov.in) to check your balance.
Gratuity Calculator
Used only to verify the 50% wage floor rule under the new Labour Code.
Wages will be at least 50% of monthly CTC
Enter your CTC/Salary and service period to calculate
Check Your EPF Balance
Visit epfindia.gov.in or the UMANG app to check your EPF balance, download passbook, and raise grievances. For any EPF-related issues, contact your regional EPFO office.Frequently Asked Questions
What is the difference between EPF and gratuity?
EPF (Employee Provident Fund) is a monthly savings contribution: both employee (12% of basic) and employer (12% of basic, split into EPF and EPS) contribute every month. You can access EPF during employment for specific purposes. Gratuity, on the other hand, is a one-time lump sum payment made only at the end of service (resignation, retirement, death, or disability). Gratuity is funded entirely by the employer — the employee contributes nothing.
Is EPF and gratuity calculated on gross salary or basic salary?
Both EPF and gratuity are calculated on basic salary only (not gross salary). For EPF, the contribution is 12% of basic + DA. For gratuity, the formula is (Basic + DA) × 15/26 × Years. Allowances like HRA, transport, and meal allowances are excluded from both calculations.
Can I get both EPF and gratuity from the same employer?
Yes. EPF and gratuity are entirely separate statutory benefits — one does not reduce or replace the other. If you served 5+ years with the same employer and were enrolled in EPF, you are eligible to receive both: (1) Your full EPF corpus (employee + employer contributions + interest) and (2) Your full gratuity calculated per the Payment of Gratuity Act.
What is the EPF eligibility vs gratuity eligibility?
EPF: All employees drawing less than ₹15,000/month basic must be enrolled from day 1. Those above ₹15,000/month can opt in. Gratuity: Minimum 5 years of continuous service (permanent employees) or 1 year for fixed-term contract employees (from November 2025). EPF has no minimum tenure for withdrawal — you can withdraw after 2 months of unemployment.
Is EPF withdrawal taxable?
EPF withdrawal is tax-free if you have served at least 5 continuous years with the same employer (or transferred the account between employers without break). If you withdraw before 5 years, TDS at 10% applies on the amount exceeding ₹50,000, and the employer's contribution is added to taxable income. Gratuity is separately exempt up to ₹20 lakh.
Can an employer deduct EPF from gratuity?
No. EPF deductions and gratuity are separate obligations. An employer cannot deduct EPF dues from your gratuity amount. Both must be settled independently. If there is an EPF default by the employer, you should file a complaint with the EPFO regional office — this does not affect your gratuity entitlement.