Gratuity Calculator - Calculate Gratuity Amount Instantly
Last drawn basic pay plus dearness allowance. Exclude HRA, bonus and other allowances.
Length of Service
Coverage under the Gratuity Act
Employee Type
Advanced options (optional)
Use this if your employer paid more than the formula, for example an ex-gratia top-up.
Resigning, retiring or switching jobs? Your gratuity is often one of the largest amounts in your full and final settlement. Enter your last Basic + DA salary and length of service to see how much gratuity you are due, how many years are counted, and how much of it is tax-free.
About Gratuity in India
Gratuity is a retirement benefit paid by your employer for long, continuous service. The rules come from the Payment of Gratuity Act, 1972, which is now part of the Code on Social Security, 2020. The Act applies to factories, shops, mines, plantations and other establishments that employ 10 or more people.
You generally become eligible after 5 years of continuous service. Gratuity is paid when you resign, retire or are laid off, and it is paid to you or your nominee on death or disablement even if you have not completed 5 years.
How is Gratuity Calculated?
Employer covered under the Act
Gratuity = Salary × 15 × Years of service ÷ 26
26 is the number of working days in a month. If your final part-year is more than 6 months, it counts as a full year: 10 years 7 months is counted as 11 years, but 10 years 6 months stays 10.
Employer not covered under the Act
Gratuity = Salary × 15 × Completed years ÷ 30
Only completed years count. The extra months are ignored.
Example: Basic + DA of ₹50,000 a month, 10 years 7 months of service, covered employer:
Gratuity = 50,000 × 15 × 11 ÷ 26 = ₹3,17,308
Gratuity Tax Rules
- Government employees: fully exempt from income tax, with no limit.
- Private-sector employees: the exempt amount is the least of the gratuity actually received, the formula amount, and the limit set under Section 10(10), currently ₹20 lakh.
- Lifetime limit: the ₹20 lakh limit is cumulative across every employer you work for, so gratuity already claimed as exempt reduces what is left.
- Taxable portion: anything above the exempt amount, such as an ex-gratia top-up, is added to your income for the year and taxed at your slab rate.
Frequently Asked Questions
What is gratuity?
Gratuity is a lump-sum amount your employer pays you in recognition of long service. It is governed by the Payment of Gratuity Act, 1972, now brought under the Code on Social Security, 2020, and becomes payable when you resign, retire, are laid off, or in case of death or disablement.
What is the formula for calculating gratuity?
If your employer is covered under the Act, gratuity = last drawn monthly salary (Basic + DA) × 15 × years of service ÷ 26. A final part-year of more than 6 months counts as a full year. If your employer is not covered, the divisor is 30 and only completed years are counted.
Why is the salary divided by 26?
The Act treats a month as 26 working days, leaving out 4 weekly offs. So monthly salary ÷ 26 gives one day's wage, and 15 days of wages are paid for every year of service. For employers outside the Act, a 30-day month is commonly used instead.
How many years of service do I need to get gratuity?
Generally 5 years of continuous service with the same employer. Courts have held that 4 years plus 240 working days in the fifth year counts as 5 years. Fixed-term employees may qualify after 1 year under the new labour codes. The 5-year condition does not apply on death or disablement.
What is the difference between covered and not covered employees?
An establishment with 10 or more employees on any day in the preceding 12 months is covered by the Act, and its employees use the ÷26 formula with part-year rounding. In smaller establishments the Act does not apply, so gratuity depends on your employment terms and is usually worked out with the ÷30 formula on completed years.
How much gratuity is tax-free?
For private-sector employees, the exempt amount under Section 10(10) is the least of the gratuity actually received, the amount worked out by the formula, and the current limit of ₹20 lakh. The ₹20 lakh limit applies across your whole career, not per employer. Anything above the exempt amount is added to your income and taxed at your slab rate.
Is gratuity taxable for government employees?
No. Gratuity received by central, state and local authority employees is fully exempt from income tax, with no upper limit.
When must the employer pay gratuity, and what if they are late?
The employer must pay within 30 days of the date gratuity becomes payable. If it is delayed, the employer must also pay simple interest on the amount, currently notified at 10% per year, unless the delay was caused by the employee.
Which salary is used for gratuity?
Only your last drawn Basic pay plus Dearness Allowance. HRA, bonus, overtime, commission and other allowances are not included.
Disclaimer
The figures from this calculator are illustrative. Gratuity rules and the ₹20 lakh ceiling are set by law and can change. This is not financial or legal advice. Please confirm your exact entitlement with your employer or a tax professional.
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