Gratuity Calculator (Payment of Gratuity Act)
Work out the gratuity payable from your last drawn salary and length of service, using the statutory formula. The calculator also shows how much of it is tax-free.
Uses the ₹20 lakh exemption limit currently in force
Use basic salary plus dearness allowance, not your full gross.
10 or more employees — a 26-day month is used, and 6+ months counts as a full year.
Result
Formula: salary × 15 × years ÷ 26
Who is eligible for gratuity
Gratuity is a lump sum an employer pays for long service. It applies to establishments with ten or more employees, and becomes payable on resignation, retirement, superannuation, death or disablement — provided the employee has completed five years of continuous service. The five-year condition is waived where service ends because of death or disablement.
Why the divisor is 26
The Act works on the idea that a month contains 26 working days, excluding the weekly rest day. Fifteen days' wages for each completed year therefore comes to fifteen twenty-sixths of a monthly salary. Employers outside the scope of the Act commonly use a 30-day month instead, which reduces the payout by roughly 13%.
The tax treatment
For employees in the private sector, gratuity is exempt from tax up to ₹20 lakh. This is a lifetime ceiling across all employers, so if you received gratuity earlier in your career, that amount counts against the same limit. Government employees receive gratuity fully exempt. Anything above the exempt amount is taxed at your applicable slab rate in the year you receive it.
A worked example
Take an employee with a basic plus DA of ₹52,000 a month who leaves after 10 years and 7 months, at an employer covered by the Act. The service rounds up to 11 years. The gratuity is ₹52,000 × 15 × 11 ÷ 26, which is ₹3,30,000 — comfortably below the ₹20 lakh ceiling, so the whole amount is tax-free.
Frequently asked questions
- What is the formula for gratuity in India?
- For an employer covered by the Payment of Gratuity Act, gratuity is (last drawn monthly salary × 15 × years of service) ÷ 26. The 26 represents working days in a month. Employers not covered by the Act use 30 instead of 26, which produces a smaller figure.
- Which salary is used — gross or basic?
- Basic salary plus dearness allowance only. HRA, special allowance, bonuses and other components are excluded. Using your full gross will significantly overstate the result.
- Do I get gratuity if I leave before five years?
- Generally no. Five years of continuous service is the minimum, and resigning at four years and eleven months means no gratuity. The exception is death or disablement, where the five-year condition does not apply and gratuity is payable to the employee or their nominee.
- Does six months of extra service count as a full year?
- Under the Act, yes. Any part-year of six months or more is rounded up, so 10 years and 7 months counts as 11 years. Below six months it is ignored. Employers outside the Act typically count only completed years.
- How much gratuity is tax-free?
- Gratuity is exempt from income tax up to a lifetime limit of ₹20 lakh for non-government employees. Anything above that is added to your income and taxed at your slab rate. The limit applies across your whole career, not per employer.
- When must the employer pay it?
- Within 30 days of it becoming payable. Beyond that the employer owes simple interest on the amount for the period of delay.
Related free tools
- Full & Final Settlement Calculator
Work out an exit settlement with pending salary, leave encashment, gratuity, notice pay and recoveries.
- Leave Encashment Calculator
Calculate the payout for unused earned leave at exit, and the portion exempt from tax.
- CTC to In-Hand Salary Calculator
Enter your CTC and see the exact monthly take-home after PF, professional tax and income tax. Free, no sign-up.
Running exits for a growing team?
Gratuity is one line in a full and final settlement. Smart Dhandha tracks joining dates, leave balances and salary history for every employee, so an exit settlement is assembled from records you already have rather than reconstructed in a spreadsheet.
- Service history and leave balances tracked per employee
- Payslips, salary revisions and exit paperwork in one place
- Statutory deductions handled through the payroll run
This tool is provided free for general guidance and uses the rates noted above. Statutory rates change, and individual circumstances differ — please confirm with your accountant or a qualified professional before relying on these figures for filing or payroll.