Gratuity Calculator

For employees covered under the Payment of Gratuity Act, gratuity = (Last drawn Basic + DA) × 15 × completed years of service ÷ 26. The salary used is the last drawn monthly Basic plus Dearness Allowance, 15 represents 15 days’ wages per year, and 26 is the assumed number of working days in a month. For example, ₹50,000 Basic+DA with 10 years of service = (50,000 × 15 × 10) ÷ 26 = ₹2,88,461.

The statutory gratuity formula under the Payment of Gratuity Act 1972 is: Gratuity = (Last drawn salary × 15 × years of service) ÷ 26, where salary means Basic + Dearness Allowance. For employees not covered by the Act, employers commonly use a 30-day divisor instead of 26: (Basic + DA) × 15 × years ÷ 30.

Gratuity is tax-exempt up to ₹20 lakh for private-sector employees covered under the Act; any amount above ₹20 lakh is added to your income and taxed at your slab rate. For government and PSU employees, gratuity is fully exempt with no upper limit. For employees not covered by the Act, exemption is the least of actual gratuity, half a month’s salary per completed year, or ₹20 lakh.

Under the Payment of Gratuity Act, an employee must complete at least 5 years of continuous service to be eligible for gratuity. However, in the event of death or disability, gratuity is payable even if 5 years are not completed.

Each completed year of service counts. A fraction of a year exceeding 6 months is rounded up to a full year for calculation purposes. For example, 10 years and 8 months = 11 years. 10 years and 4 months = 10 years.

The maximum gratuity payable under the Payment of Gratuity Act is ₹20 lakh (₹20,00,000). This ceiling was last revised in 2018. An employer can pay more as ex-gratia, but the tax exemption is limited to ₹20 lakh for private sector employees.

Gratuity must be paid within 30 days of the employee becoming eligible (resignation, retirement, death, disablement). If payment is delayed beyond 30 days, the employer must pay simple interest on the outstanding amount.

Contract employees working through a contractor are covered if they complete 5 years of continuous service with the same principal employer, regardless of the contract employer. Fixed-term contract employees are also entitled to gratuity on pro-rata basis under recent amendments.