Gratuity Calculator

The Gratuity Calculator works out the gratuity you are entitled to under the Payment of Gratuity Act, 1972 using the well-known 15/26 formula. Enter your last drawn salary (Basic + Dearness Allowance) and your length of service, and the tool shows your gratuity amount, how the 6-month rounding rule changes your credited years, a covered (÷26) versus not-covered (÷30) comparison, the ₹2,000,000 tax-free split, your 5-year eligibility status, and a year-by-year projection of how your gratuity grows the longer you stay.

What is Gratuity?

Gratuity is a lump-sum benefit an employer pays an employee as a token of appreciation for long and continuous service. In India it is governed by the Payment of Gratuity Act, 1972, which applies to factories, mines, oilfields, plantations, ports, railways, shops, and other establishments employing 10 or more people. Gratuity becomes payable when an employee leaves after completing the qualifying period of service — through resignation, retirement, superannuation, or in the event of death or disablement.

Gratuity Formula (15/26)

For employees covered by the Act, gratuity is calculated as 15 days' wages for every completed year of service, where a month is treated as 26 working days:

Employees not covered by the Act (for example, where the employer has fewer than 10 employees but pays gratuity voluntarily) use a divisor of 30 instead of 26, and the salary is the average of the last 10 months:

Here last drawn salary means your most recent monthly Basic pay plus Dearness Allowance (DA) — it does not include HRA, bonus, overtime, or other allowances.

The 6-Month Rounding Rule

The Act credits gratuity "for every completed year of service or part thereof in excess of six months." In practice this means a part-year of 6 months or more is rounded up to a full year, while less than 6 months is dropped. This rounding can meaningfully change your gratuity, and it is the step most calculators hide — so this tool shows it visually.

Gratuity Eligibility

You generally need 5 years of continuous service with the same employer to qualify for gratuity. Some court rulings have treated 4 years and 240 days (or 190 days for those working below ground in mines) as a completed fifth year, but the safe rule is a full 5 years. The 5-year requirement is waived if employment ends due to death or disablement, in which case gratuity is payable regardless of how long the employee served, and is paid to the nominee or legal heir.

Is Gratuity Taxable?

The income-tax treatment of gratuity depends on who you work for:

• Government employees: Gratuity received is fully exempt from income tax.
• Private employees covered by the Act: Exempt up to a lifetime ceiling of ₹2,000,000; the least of the actual gratuity, the formula amount, and ₹2,000,000 is tax-free.
• Amounts above the ceiling: Any gratuity received beyond the exemption limit is added to your salary income and taxed at your applicable slab rate.

The ₹2,000,000 ceiling is a lifetime limit across all employers, so gratuity exemptions claimed in earlier jobs reduce the limit available later.

How to Use This Calculator

1. Enter your last drawn salary: Use your monthly Basic pay plus Dearness Allowance (DA).
2. Enter your length of service: Add your completed years and any extra months of continuous service.
3. Select your employee type: Choose "Covered under the Act" (divisor 26) or "Not covered" (divisor 30).
4. Click Calculate: Review your gratuity, the service rounding, the covered-vs-not-covered comparison, the tax-free split, your eligibility, and the projection of how the amount grows if you stay longer.

What Affects Your Gratuity?

Frequently Asked Questions

What is the gratuity formula?

For employees covered by the Payment of Gratuity Act, 1972, gratuity equals 15 × last drawn salary (Basic + DA) × completed years of service ÷ 26. The 26 represents the number of working days in a month. Employees not covered by the Act use a divisor of 30 instead of 26.

What does last drawn salary mean for gratuity?

For gratuity, last drawn salary means your most recent monthly Basic pay plus Dearness Allowance (DA). It excludes house rent allowance, bonuses, overtime, and other allowances. For employees not covered by the Act, the average of the last 10 months of salary is used instead.

How are years of service rounded for gratuity?

For covered employees, a part-year of 6 months or more is rounded up to a full year, while less than 6 months is dropped. For example, 7 years 7 months counts as 8 years, but 7 years 4 months counts as 7 years. Not-covered employees are credited only with completed years.

How many years do I need to be eligible for gratuity?

You generally need at least 5 years of continuous service with the same employer. This requirement is waived if employment ends due to death or disablement, in which case gratuity is payable regardless of length of service.

Is gratuity taxable?

For non-government employees covered by the Act, gratuity is exempt from income tax up to a lifetime limit of ₹2,000,000. Any gratuity above this ceiling is added to your salary income and taxed at your slab rate. Government employees receive gratuity that is fully tax-exempt.

What is the maximum gratuity amount?

There is no cap on the gratuity an employer may pay, but the income-tax exemption for non-government employees is capped at ₹2,000,000 over a lifetime. Employers may pay more than the statutory formula as ex-gratia, but amounts above the exemption ceiling become taxable.

Additional Resources

• Gratuity - Wikipedia
• Dearness Allowance - Wikipedia