Gratuity Calculator – India
Calculate Gratuity amount based on last drawn salary and years of service. Free Gratuity calculator as per Payment of Gratuity Act.
1Enter your details
Basic + Dearness Allowance per month at the time of leaving
Completed years (min 5 for eligibility)
2Your results
Fill in the inputs and click Calculate
Results will appear here
Real-World Examples
15 Years Service, ₹50,000 Basic
Formula: (50000 × 15 × 5) / 26 = ₹1.44L. Minimum 5 years needed. Tax-free up to ₹20 lakh.
210 Years Service, ₹80,000 Basic
Longer service = higher gratuity. Consider before switching jobs if close to milestone years.
320 Years Loyal Employee
Gratuity grows linearly with years. ₹11.5L is tax-free. A significant retirement benefit.
Frequently Asked Questions
Gratuity is a lump sum monetary benefit paid by the employer to an employee as gratitude for services rendered. Under the Payment of Gratuity Act, 1972, it is mandatory for organizations with 10+ employees.
Gratuity = (Last drawn salary × 15/26) × Years of service. Last drawn salary includes Basic + DA. 15/26 represents 15 days of salary for each completed year, assuming 26 working days per month.
Minimum 5 years of continuous service is required for gratuity eligibility. However, in case of death or disability, gratuity is payable even if service is less than 5 years. Service of 4 years 8 months is rounded to 5 years.
Gratuity received by government employees is fully exempt from tax. For private sector: actual gratuity received, or ₹20 lakh, or calculated gratuity - whichever is least is exempt. Amount above exemption is taxable.
The maximum tax-free gratuity limit is ₹20 lakh as per the amendment in 2019. Any amount received above this limit is taxable. The ceiling applies to the total gratuity received during lifetime from all employers.
Service period more than 6 months is rounded up to the next full year. For example, 5 years 7 months = 6 years for gratuity calculation. Period less than 6 months is ignored.
An employer can forfeit gratuity wholly or partially if the employee is terminated for: 1) Moral turpitude, 2) Riotous or disorderly conduct, 3) Any act causing damage to employer property. Regular resignation or retirement cannot be grounds for denial.
For employees covered under the Gratuity Act: formula is (Basic+DA × 15/26) × years. For non-covered employees: formula is (Basic+DA × 15/30) × years. The denominator differs (26 vs 30 working days).
Yes, most companies include gratuity in CTC as it is a future liability. It is typically calculated as 4.81% of basic salary annually ((15/26)/12 months ≈ 4.81%). However, you receive it only after 5 years of service.
If you leave before completing 5 years, you are not entitled to gratuity. The employer's gratuity provision is reversed. It's advisable to complete 5 years if you're close to eligibility before switching jobs.
Complete Guide to Gratuity Calculation in India 2025
Gratuity is a retirement benefit paid by employers to employees as a token of gratitude for their service. Under the Payment of Gratuity Act, 1972, it is a legal entitlement for employees who complete 5 years of continuous service. This guide explains everything about gratuity calculation, eligibility, tax rules, and maximum limits.
What is Gratuity?
Gratuity is a lump sum payment made by an employer to an employee when they leave the organization after completing at least 5 years of continuous service. It's calculated based on the last drawn salary and years of service. The Payment of Gratuity Act applies to all establishments with 10 or more employees.
Gratuity Calculation Formula
For employees covered under the Gratuity Act:
Gratuity = (Last Drawn Salary × 15 × Years of Service) ÷ 26
- • Last Drawn Salary: Basic + Dearness Allowance (DA)
- • 15: Represents 15 days of salary per year of service
- • 26: Working days in a month (excluding Sundays)
For employees NOT covered under the Act:
Gratuity = (Last Drawn Salary × 15 × Years of Service) ÷ 30
Gratuity Eligibility Criteria
- Minimum 5 years of continuous service with the same employer
- Service of 4 years 6 months or more is rounded up to 5 years
- Exception: In case of death or disability, gratuity is payable even without completing 5 years
- Applies to employees in factories, mines, oilfields, plantations, ports, railways, and shops with 10+ employees
Gratuity Tax Exemption Rules
Government Employees
Gratuity received is fully exempt from income tax. No upper limit.
Private Sector Employees
Exempt up to ₹20 lakh (increased from ₹10 lakh in 2019). Amount above this is taxable.
For private sector employees, the tax-exempt gratuity is the least of:
- Actual gratuity received
- ₹20,00,000 (maximum limit)
- Gratuity calculated as per formula
How Years of Service are Calculated
- • Service period of 6 months or more is rounded UP to the next full year
- • Service period less than 6 months is ignored
- • Example: 7 years 8 months = 8 years for gratuity
- • Example: 7 years 4 months = 7 years for gratuity
Gratuity in CTC Structure
Many companies include gratuity as part of CTC (Cost to Company). The typical provision is 4.81% of basic salary:
Calculation: (15/26) ÷ 12 months = 4.81%
For ₹50,000 basic: Annual gratuity provision = ₹28,846 (₹50,000 × 4.81% × 12)
Important: Even though gratuity is part of CTC, you only receive it after completing 5 years. If you leave before 5 years, you forfeit this amount.
When is Gratuity Payable?
- Retirement: On reaching superannuation age
- Resignation: After completing 5 years of continuous service
- Death: Payable to nominee/legal heir (even before 5 years)
- Disability: Due to accident or disease (even before 5 years)
- Termination: Unless terminated for misconduct causing damage
Forfeiture of Gratuity
An employer can forfeit gratuity (wholly or partially) only if the employee is terminated for:
- Moral turpitude (dishonest or immoral behavior)
- Riotous or violent behavior
- Acts causing loss or damage to employer's property
Regular resignation, layoff, or retirement cannot be grounds for denying gratuity.
Gratuity Payment Timeline
As per the law, employer must pay gratuity within 30 days from the date it becomes payable. If delayed beyond 30 days, employer must pay simple interest at the rate notified by the government.
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Disclaimer: Gratuity rules are governed by the Payment of Gratuity Act, 1972 and amendments. Tax exemption limits and rules may change. For specific situations or disputes, consult a labor law expert or your company's HR department.
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Disclaimer: All calculations are estimates based on current tax rules and regulations. Actual values may vary depending on your specific circumstances. Please consult a certified financial advisor or CA for personalized advice.