Gratuity Calculator

How Gratuity Calculator Works

Gratuity is a lump-sum benefit an employer pays an employee as a reward for continuous service, once they cross a minimum service threshold under the Payment of Gratuity Act, 1972. It is based on your last-drawn basic salary plus dearness allowance and your total years of service, not on your full CTC.

Formula & Method

The standard formula is (Basic + DA) ÷ 26 × 15 × years of service for employees covered under the Act (26 being the assumed working days per month, and 15 being half a month's salary per year of service). Employees at organizations not covered under the Act conventionally use a ÷30 divisor and the average of their last 10 months' salary instead of the last-drawn figure -- this calculator lets you switch between the two divisors, using your entered salary as a stand-in for that 10-month average in the "not covered" mode. Years of service are rounded up to the next full year if the extra period is 6 months or more, and the entire year-count uses this rounded figure. The result is capped at the current statutory limit of ₹20,00,000, and requires at least 5 years of continuous service to be payable at all (except in case of death or disablement).

Worked Example

For a combined Basic + DA of ₹40,000 with 8 years and 4 months of completed service (rounded down to 8 years, since 4 months is under the 6-month rounding threshold), under the "Covered" (÷26) rule: gratuity = (₹40,000 ÷ 26) × 15 × 8 ≈ ₹1,84,615 -- comfortably under the ₹20,00,000 statutory cap.

Frequently Asked Questions

What happens if my service is less than 5 years?

You are generally not eligible for gratuity under the standard rule -- the Act requires at least 5 years of continuous service, with exceptions made only in the case of death or disablement. This tool flags that with a note when your entered dates fall short.

Why does 8 years and 7 months count as 9 years in the formula?

The Act rounds your service period up to the next full year whenever the extra period beyond a completed year is 6 months or more; anything less than 6 months is dropped. So 8 years 7 months rounds up to 9, while 8 years 4 months stays at 8.

What is the difference between "Covered" and "Not Covered" under the Act?

Employees at organizations covered under the Act use a ÷26 divisor (assuming 26 working days a month) applied to last-drawn Basic + DA. Employees not covered use a ÷30 divisor and are conventionally meant to use the average of their last 10 months' salary rather than the last-drawn figure -- this tool uses your entered monthly salary as a stand-in for that average.

Is the gratuity amount taxable?

For private-sector employees, gratuity is tax-exempt up to the statutory limit (currently ₹20,00,000 across your career); any amount received above that limit is taxable as income. Government employees receive their gratuity fully tax-exempt with no cap.