Gratuity Calculator
Calculate your gratuity earnings under the Payment of Gratuity Act, 1972.
Estimated Gratuity Amount
₹1,44,231
✓ You are eligible for gratuity as you have completed the minimum requirement of 5 years of service.
How the Gratuity Calculator works
Reviewed by Dinesh Babu · Last updated July 2026
Gratuity is a lump sum an employer pays as a reward for long service, generally after you complete 5 continuous years. This calculator uses the standard Payment of Gratuity Act formula to estimate the amount from your last drawn monthly salary (basic + DA) and your years of service.
For employees covered by the Act, gratuity is 15 days' wages for each completed year of service, computed on a 26-working-day month — which is where the 15/26 fraction comes from. Service beyond 6 months in your final year rounds up to a full year, while less than 6 months is ignored. The amount is tax-exempt up to a ceiling of ₹20 lakh.
Gratuity formula (Payment of Gratuity Act)
Gratuity = (15 / 26) × last drawn monthly salary (basic + DA) × completed years of service
Service over 6 months rounds up to the next full year. Tax-exempt up to ₹20 lakh.
Who is eligible and when
Eligibility normally requires 5 years of continuous service with the same employer. The 5-year rule is relaxed if service ends due to death or disability, in which case gratuity is payable regardless of tenure.
Gratuity is triggered on resignation, retirement, superannuation or termination (other than for serious misconduct), and on death or disablement. It is a statutory right for covered employees, not a discretionary bonus.
Points that trip people up
- Only basic + DA counts as salary for the formula — not HRA, allowances or bonuses.
- The 26-day divisor reflects a standard working month excluding weekly offs; it is part of the statutory formula, not an error.
- The ₹20 lakh exemption is a lifetime aggregate across employers, not per employer.
- Employees not covered by the Act may have gratuity computed on a different basis (often 15/30), so confirm your employer's scheme.
10 years of service, ₹40,000 last basic+DA
Gratuity = (15 / 26) × ₹40,000 × 10 = ₹2,30,769 (approximately). This is fully tax-exempt as it is well under the ₹20 lakh ceiling.
Rounding the final year
If you worked 7 years and 8 months, the 8 months (more than 6) round up, so you are paid for 8 years. Had it been 7 years and 4 months, you would be paid for 7 years — the extra months are dropped.
Hitting the tax-exempt ceiling
Suppose the formula gives ₹22 lakh. Only ₹20 lakh is tax-exempt; the remaining ₹2 lakh is added to your income and taxed at your slab. The calculator flags the exempt limit so you can plan for any tax on the excess.
Common mistakes to avoid
- Using your gross or full CTC salary in the formula instead of just basic + DA.
- Assuming any partial year counts — only more than 6 months in the final year rounds up to a full year.
- Expecting gratuity before completing 5 years (except in cases of death or disability).
- Believing the entire gratuity is always tax-free — only up to ₹20 lakh is exempt, and that limit is a lifetime aggregate.
Frequently asked questions
Who is eligible for gratuity?+
Generally, employees who complete 5 continuous years with an employer. The 5-year rule is waived if employment ends due to death or disability.
How is gratuity calculated?+
For covered employees, it is (15 / 26) × last drawn monthly salary (basic + DA) × completed years of service. The 15/26 reflects 15 days' wages per year on a 26-day working month.
Is gratuity taxable?+
Gratuity is tax-exempt up to ₹20 lakh for covered employees; any amount above that is added to your income and taxed at your slab. The ₹20 lakh limit applies across your working life, not per employer.
Does a partial year of service count?+
Service beyond 6 months in the final year rounds up to a full year; 6 months or less is ignored. So 7 years 8 months counts as 8 years, but 7 years 4 months counts as 7.
Which part of my salary is used?+
Only your last drawn basic salary plus dearness allowance (DA). HRA, special allowances and bonuses are not included in the gratuity formula.
Is this figure exact?+
It is a reliable estimate under the Payment of Gratuity Act formula. If your employer is not covered by the Act or uses a different scheme, the amount can differ — confirm with your HR or a professional.