Gratuity Calculator

What is gratuity?

Gratuity is a lump sum an employer pays when you leave after at least five years of continuous service — on resignation, retirement or termination — as a reward for long service. Under the Payment of Gratuity Act, it is 15 days’ wages for every completed year of service, based on your last drawn basic pay plus dearness allowance, divided by 26 working days a month.

This gratuity calculator applies the statutory formula, rounds service of more than six months up to the next year as the Act requires, and shows the tax-exempt and taxable portions.

How this calculator works

Gratuity is a lump sum your employer pays for long service, governed by the Payment of Gratuity Act, 1972. You become eligible after five years of continuous service, and the amount depends only on your last drawn Basic + DA and how long you served.

For establishments covered by the Act, each year of service earns 15 days of wages, and a month is treated as 26 working days — hence the 15/26 formula. A part-year of six months or more is rounded up to a full year, which can be worth a meaningful amount.

Employers not covered by the Act use 15/30 instead, based on the average salary of the last ten months, and part-years are not rounded up.

Formula

Covered by the Act:
  Gratuity = (15 ÷ 26) × last drawn Basic + DA × completed years
             (part-year of 6 months or more counts as a full year)

Not covered:
  Gratuity = (15 ÷ 30) × average Basic + DA of last 10 months × completed years

Worked example

Last drawn Basic + DA of ₹60,000, 7 years and 8 months of service, covered employer.
8 months rounds up, so 8 years count.
Gratuity = (15 ÷ 26) × 60,000 × 8 = ₹2,76,923 — fully exempt, being below the ₹20 lakh cap.

Gratuity for different salaries and service

Employer covered by the Act; last drawn basic + DA per month
Basic + DA	5 years	10 years	20 years
₹30,000	₹86,538	₹1,73,077	₹3,46,154
₹50,000	₹1,44,231	₹2,88,462	₹5,76,923
₹1,00,000	₹2,88,462	₹5,76,923	₹11,53,846

Eligibility and tax

Five years of continuous service with the same employer is required, except on death or disablement.
Under the Labour Codes in force since 21 November 2025, fixed-term employees become eligible after one year of service.
Gratuity is tax-exempt up to ₹20 lakh over your whole career for private-sector employees; government employees’ gratuity is fully exempt.
For employers not covered by the Act, the formula uses half a month’s average salary for each completed year, based on the last ten months’ average.

Assumptions & important notes

What this calculator assumes

Service is continuous. Breaks in service may reset the five-year clock depending on the circumstances.
The calculation uses last drawn Basic + DA. For employers not covered by the Act it should be the average of the last ten months.
The ₹20 lakh exemption is a lifetime limit across all employers, not per employer.

Important notes

The five-year rule is waived where employment ends due to death or disablement.
For government employees the entire gratuity is exempt from tax.
Gratuity must be paid within 30 days of becoming payable; delays attract simple interest.

Frequently asked questions

Do I get gratuity if I leave after 4 years and 8 months?

Generally no — five years of continuous service is the threshold. Some court rulings have treated 4 years and 240 days as sufficient in the fifth year, but employers differ in whether they apply this.

Why divide by 26 and not 30?

The Act treats a month as 26 working days, excluding the four weekly rest days. This makes the per-day wage higher and the gratuity larger than a 15/30 calculation would give.

Is gratuity taxable?

Up to ₹20 lakh is exempt over your lifetime for non-government employees. Anything above that is added to your salary income and taxed at your slab rate.

Does gratuity in my CTC mean I will definitely get it?

No. Many employers show gratuity as 4.81% of basic inside CTC, but it is only paid once you complete five years. Leave earlier and that part of your CTC never materialises.

Is gratuity paid if I resign?

Yes, if you have completed five years of continuous service. The reason for leaving does not matter, except that gratuity can be forfeited if you are dismissed for specified misconduct.

About the Gratuity Calculator