How to use this calculator
- Last drawn monthly salary — basic pay plus dearness allowance only. Not gross, not CTC. HRA, bonus and other allowances are excluded.
- Years of service — total completed years with this employer. See the rounding rule below, it matters.
The calculator applies the standard formula used for employees covered by the Payment of Gratuity Act, 1972.
The formula and how the maths works
For employees covered by the Act:
Gratuity = Last drawn salary × 15 / 26 × Years of service
The 15/26 comes from the law treating gratuity as 15 days of wages for each completed year, with a month counted as 26 working days rather than 30.
The rounding rule that surprises people
Service is rounded to the nearest full year, and more than six months counts as a full year. So:
- 7 years 5 months → treated as 7 years
- 7 years 7 months → treated as 8 years
On a ₹50,000 salary that two-month difference is worth about ₹28,850. If you're close to the line and planning to resign, it is worth checking your exact joining date.
Employees not covered by the Act
Some establishments with fewer than ten employees fall outside the Act. There the customary formula is salary × 15 / 30 × years, and part-years are not rounded up. That produces a noticeably smaller amount.
Worked example
Ramesh resigns after 12 years and 8 months. His last drawn basic plus DA is ₹52,000 a month.
| Step | Working |
|---|---|
| Rounded service | 12 yrs 8 months → 13 years |
| Daily wage basis | ₹52,000 ÷ 26 = ₹2,000 |
| 15 days per year | ₹2,000 × 15 = ₹30,000 |
| × 13 years | ₹3,90,000 |
Ramesh receives ₹3,90,000, entirely tax-free since it is well under the ₹20 lakh exemption limit.
Gratuity at different salary and service levels
| Salary (basic + DA) | 5 years | 10 years | 20 years | 30 years |
|---|---|---|---|---|
| ₹25,000 | ₹72,115 | ₹1,44,231 | ₹2,88,462 | ₹4,32,692 |
| ₹50,000 | ₹1,44,231 | ₹2,88,462 | ₹5,76,923 | ₹8,65,385 |
| ₹75,000 | ₹2,16,346 | ₹4,32,692 | ₹8,65,385 | ₹12,98,077 |
| ₹1,00,000 | ₹2,88,462 | ₹5,76,923 | ₹11,53,846 | ₹17,30,769 |
| ₹1,50,000 | ₹4,32,692 | ₹8,65,385 | ₹17,30,769 | ₹20,00,000* |
Official sources: Ministry of Labour & Employment
*Employers may pay more, but the amount exempt from tax is capped — see below.
Eligibility, tax treatment and payment rules
Who qualifies
You generally need five years of continuous service with the same employer. The five-year rule is waived if service ends because of death or disablement.
Tax
- Government employees — gratuity is fully exempt from income tax.
- Private-sector employees covered by the Act — exempt up to the least of: ₹20 lakh, the actual gratuity received, or the amount from the 15/26 formula. Anything above that is taxed at your slab rate.
- The ₹20 lakh ceiling is a lifetime limit across all employers, not per job.
When it must be paid
Gratuity is payable within 30 days of becoming due. Beyond that, the employer owes simple interest. If a genuine claim is refused, you can approach the Controlling Authority under the Act.
Common mistakes
- Using gross salary or CTC instead of basic + DA — the most frequent error, and it overstates gratuity by a wide margin.
- Forgetting the six-month rounding rule and under-estimating a final payout.
- Assuming four years and eleven months qualifies. It usually doesn't — the five-year rule is strict outside death and disablement.
- Treating the ₹20 lakh exemption as applying afresh at each employer.
- Using 15/26 when your establishment isn't covered by the Act, where 15/30 applies.
Frequently Asked Questions
Is gratuity taxable?
For government employees it is fully exempt. For private-sector employees covered by the Act, it is exempt up to the least of ₹20 lakh, the actual amount received, or the amount produced by the 15/26 formula. Anything above that is taxed at your slab rate.
What is the minimum service for gratuity?
Normally five years of continuous service with the same employer. The requirement is waived where service ends due to death or disablement.
Does 4 years 7 months qualify?
No. The six-month rounding rule applies only once you have crossed the five-year eligibility threshold — it does not create eligibility on its own.
Which salary is used in the formula?
Your last drawn basic pay plus dearness allowance. HRA, bonus, conveyance and other allowances are excluded.
Why 26 and not 30 days?
The Payment of Gratuity Act treats a month as 26 working days, excluding weekly offs, when converting monthly salary into a daily wage.
Is the ₹20 lakh limit per employer?
No, it is a lifetime ceiling. Exemption already used at a previous employer reduces what remains available.
When must my employer pay it?
Within 30 days of the amount becoming due. Late payment attracts simple interest, and refusal can be challenged before the Controlling Authority.
Do I get gratuity if I resign?
Yes, provided you have completed five years of continuous service. Gratuity is not limited to retirement.
Can an employer pay more than the formula amount?
Yes, many do as a matter of policy. Anything above the statutory calculation is simply taxable in your hands.
Is gratuity part of CTC?
Employers often show it in CTC, but you only receive it if you complete the qualifying service. Treat it as conditional, not guaranteed.
Related calculators and guides
Disclaimer. This calculator provides estimates for general guidance only and is not financial, tax or legal advice. Rates, rules and limits change, and your own situation may differ. Please verify current figures with the relevant authority or a qualified professional before acting on them.