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Gratuity Calculator

Calculate Your Gratuity

Calculate your gratuity amount based on the Payment of Gratuity Act, 1972.

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Minimum 5 years of continuous service required for gratuity eligibility.

Gratuity Calculation Formula

For employees covered under the Gratuity Act:

Gratuity = (Last Drawn Salary × 15 × Years of Service) / 26

For employees not covered under the Act:

Gratuity = (Last Drawn Salary × 15 × Years of Service) / 30

"Last Drawn Salary" includes Basic Pay + Dearness Allowance (DA).

Gratuity Eligibility & Rules

  • Employee must have completed minimum 5 years of continuous service
  • Applicable to organizations with 10 or more employees
  • Maximum gratuity limit is ₹20 lakhs (as per current rules)
  • Payable on resignation, retirement, or death/disability of an employee
  • In case of death or disability, the 5-year rule is waived
  • Service period of 6+ months rounds up to the next year
  • Gratuity received is tax-exempt up to ₹20 lakhs for private sector employees

Gratuity Calculation Example

Suppose: An employee's last drawn Basic + DA is ₹60,000/month and they have completed 12 years of service in a company covered under the Gratuity Act.

Gratuity = (60,000 × 15 × 12) / 26 = ₹4,15,385

If not covered under the Act: Using the same salary and years of service:

Gratuity = (60,000 × 15 × 12) / 30 = ₹3,60,000

The difference arises because the Act considers 26 working days per month, while non-covered employees use 30 calendar days.

Frequently Asked Questions

Common questions about gratuity in India

What is gratuity and who is eligible? −

Gratuity is a lump-sum payment made by an employer to an employee as a token of appreciation for services rendered. Under the Payment of Gratuity Act, 1972, an employee is eligible for gratuity after completing 5 years of continuous service with an organization that has 10 or more employees.

Is gratuity taxable in India? −

For government employees, gratuity is fully tax-exempt. For private sector employees covered under the Gratuity Act, the least of the following is exempt: actual gratuity received, ₹20 lakhs, or 15 days' salary for each completed year of service. Any amount above the exemption limit is taxable as income.

Can I get gratuity before 5 years? −

Generally, no. The 5-year rule is mandatory under the Gratuity Act. However, there are two exceptions: (1) if the employee dies during service, and (2) if the employee becomes disabled during service. In these cases, gratuity is payable regardless of the length of service.

What is the maximum gratuity limit? +

The current maximum gratuity limit is ₹20 lakhs. This was increased from ₹10 lakhs in 2019. Even if the calculated gratuity exceeds ₹20 lakhs, the employer is legally required to pay only up to this limit, though some employers may pay more as a goodwill gesture.

Why does the formula use 26 days instead of 30? +

The Gratuity Act uses 26 working days per month (30 calendar days minus 4 Sundays). This is the standard used for employees covered under the Act. For employees not covered under the Act, 30 calendar days per month are used in the calculation.

Have more questions? Check our knowledge base or contact us.