Gratuity Calculator.

Under the Payment of Gratuity Act, 1972, the standard formula for an employee covered under the Act is: gratuity equals 15 times the last drawn basic salary plus dearness allowance, times the number of completed years of service, divided by 26. The 26 in the denominator represents the number of working days considered in a month under the Act, rather than a calendar month of 30 days. So for someone with a last drawn basic plus DA of Rs 40,000 and 8 years of service, the calculation is 15 times 40,000 times 8, divided by 26, which works out to approximately Rs 1,84,615. This calculator applies exactly this formula for employees covered under the Act, and offers a 30-day divisor variant for the small number of establishments not covered under the Act that follow a different convention. Always use your basic pay plus DA, not your gross salary, CTC, or take-home pay, since other salary components do not enter this calculation.

Generally, an employee must complete at least five years of continuous service with the same employer to become eligible for gratuity under the Payment of Gratuity Act. This five-year requirement is waived only in the specific cases of the employee death or disablement during employment, in which case gratuity becomes payable to the employee or their nominee regardless of how many years they had completed. Continuous service has a specific legal meaning that generally excludes certain breaks, though minor interruptions like approved leave, sickness or accidents typically do not break continuity. If you resign or are terminated before completing five years, for reasons other than death or disability, you are generally not entitled to statutory gratuity under the Act, though some employers may still choose to pay an ex-gratia amount voluntarily as a goodwill gesture, which is separate from the statutory entitlement this calculator estimates.

When your service period includes a number of complete years plus some additional months, the Act rounding convention treats any additional period of six months or more as a full extra year, while anything less than six months is dropped and does not count. For example, 7 years and 8 months of service is treated as 8 completed years for the gratuity calculation, since 8 months exceeds the halfway mark, whereas 7 years and 4 months would be treated as just 7 years, since 4 months falls short of the threshold. This rounding rule can make a meaningful difference to your payout on a long tenure, since it either adds or drops a full extra year worth of the 15-day multiplier. This calculator applies that exact rounding rule automatically based on the years and additional months you enter, so you do not need to work out the threshold yourself.

Yes, there is a statutory ceiling on the amount of gratuity that is tax-exempt and that private-sector employers are required to pay under the Act, which currently stands at Rs 20,00,000. If your calculated gratuity using the 15/26 formula comes out higher than this ceiling, the amount payable under the Act is capped at the ceiling figure, though some generous employers do choose to pay amounts above the statutory cap as a matter of internal policy, in which case the portion above the ceiling may be taxed differently and does not carry the same automatic exemption. This calculator applies the current statutory ceiling automatically and will show you both the uncapped formula result and the capped payable amount whenever your calculation exceeds the limit, so you can see clearly how much of your entitlement falls within the tax-free ceiling.

For most private-sector employees covered under the Payment of Gratuity Act, gratuity received is tax-exempt up to the statutory ceiling, currently Rs 20,00,000, which means the amount this calculator shows as your payable gratuity, after applying the cap, is generally received tax-free. Government employees typically enjoy full tax exemption on gratuity without the same ceiling constraints, reflecting different rules for public sector retirement benefits. If your employer voluntarily pays gratuity above the statutory ceiling, or if you have already received gratuity from a previous employer that used up part of your lifetime exemption limit, the tax treatment of any excess can become more complex and is worth confirming with a tax advisor or chartered accountant before you assume the entire amount is tax-free. For the vast majority of employees within the standard ceiling, though, the gratuity you receive on resignation, retirement or lay-off adds no income tax burden.

The Act applies compulsorily to any establishment with ten or more employees on any day in the preceding twelve months, and once covered, an establishment generally remains covered even if the headcount later drops below ten. If your specific employer genuinely falls outside the Act coverage, for example a very small establishment that has never crossed the ten-employee threshold, gratuity is not a statutory legal right in the same way, though many such employers still pay gratuity voluntarily, often using a similar formula but sometimes with a 30-day divisor instead of 26, since the working-day convention under the Act does not technically apply to them. This calculator includes a toggle for this scenario, applying a 30-day divisor when you select not covered, which approximates the common voluntary practice, though your specific employer policy may differ, and this scenario carries no guaranteed legal entitlement in the same way covered employment does.