Gratuity Calculator

How to use this calculator

1. Enter your last drawn monthly salary — use basic salary plus dearness allowance (DA) only, not your full CTC.
2. Enter your total years of service with the employer (a period over 6 months counts as a full year).
3. Click Calculate Gratuity to see your eligible lump sum.

How gratuity is calculated

Gratuity is a lump-sum benefit paid by an employer to an employee for long service, governed by the Payment of Gratuity Act, 1972. For covered employees, the formula is:

Gratuity = (15 × last drawn salary × years of service) / 26

Here "last drawn salary" means basic salary plus dearness allowance, "15" represents 15 days' wages for each completed year, and "26" is the standard number of working days in a month. The maximum gratuity payable is capped at ₹20 lakh (tax-free).

Worked example

An employee with a last drawn basic+DA of ₹50,000 per month who has worked for 10 years receives: (15 × 50,000 × 10) / 26 = ₹2,88,462. If the same employee worked for 25 years, the gratuity would be ₹7,21,154. For very long service at higher salaries, the ₹20 lakh statutory cap can apply — for example, someone with ₹1,50,000 monthly basic and 30 years of service would compute to ₹25.96 lakh but receive the capped ₹20 lakh.

Eligibility rules

You become eligible for gratuity after 5 years of continuous service with the same employer. The 5-year requirement is waived if service ends due to death or disablement. When counting years, a period of more than 6 months in the final year is rounded up to a full year — so 10 years 7 months counts as 11 years, while 10 years 5 months counts as 10. This rounding can meaningfully change the payout, so check your exact joining and leaving dates.

Gratuity taxation

For private-sector employees covered by the Act, gratuity up to ₹20 lakh is fully tax-free. Government employees receive entirely tax-free gratuity regardless of amount. Any gratuity above the ₹20 lakh ceiling is taxed as salary income at your slab rate. The tax-free limit was raised from ₹10 lakh to ₹20 lakh in 2018, a significant benefit for long-serving, higher-salaried employees.

What if my employer isn't covered by the Act?

The Payment of Gratuity Act applies to establishments with 10 or more employees. For employees of smaller establishments not covered by the Act, gratuity (if offered) is calculated as (15 × last salary × years) / 30 — using 30 days instead of 26, which yields a slightly lower amount. This calculator uses the standard covered-employee formula (÷26); if your employer is not covered, your actual gratuity may be marginally lower.

Disclaimer

This calculator implements the Payment of Gratuity Act 1972 formula for covered employees as of early 2026. Actual gratuity depends on your employer's coverage status, your exact service period, and your salary structure. The ₹20 lakh cap and tax rules are current as of early 2026 and subject to change. This is not legal or tax advice — consult your HR department or a Chartered Accountant for your exact entitlement.

Frequently asked questions