Gratuity Calculator
Calculate your gratuity payout upon leaving or retiring from a company in India according to the Payment of Gratuity Act, 1972.
How it works
Gratuity is a statutory monetary benefit provided by employers to employees who render continuous service for 5 years or more in an organization with 10 or more employees. The payout uses the formula: (15 × Last Drawn Basic Salary × Completed Tenure) ÷ 26.
Formula
Gratuity = (15 × Last Drawn Basic Salary × N / 26)
For employees covered under the Act, gratuity equals 15 days of salary for every completed year of service, where a month is taken as 26 working days.
| Symbol | Variable | Unit | Description |
|---|---|---|---|
| Basic | Last drawn Basic salary + Dearness Allowance | ₹ | |
| N | Completed years of service | years | |
| 26 | Number of working days in a month (excluding Sundays) | days | |
| 15 | 15 days wages per completed year of service | days |
Worked example
₹50,000 basic salary with 7 years of service
- Basic Salary (+ DA):
- ₹50,000
- Years of Service:
- 7
Gratuity = (15 × 50,000 × 7) / 26 = 52,50,000 / 26 = ₹2,01,923.08. Since this is under the ₹20 Lakh statutory cap, the entire ₹2,01,923 is completely tax-exempt.
Limitations
Establishments not covered under the Act may use a 30-day divisor formula instead of 26 days.
Frequently asked questions
Is 5 years mandatory for gratuity eligibility?
Yes, under the Payment of Gratuity Act, 1972, an employee must complete at least 5 years of continuous service. The only exceptions where the 5-year condition is waived are death or disablement due to accident/disease.
How is gratuity taxed in India?
For government employees, gratuity is 100% tax-free. For private sector employees covered under the Act, gratuity received is tax-exempt up to a lifetime statutory limit of ₹20 Lakhs.
What components of salary are included in the gratuity calculation?
Only Basic Salary and Dearness Allowance (DA) are included. Other components like HRA, Special Allowance, conveyance, LTA, and performance bonus are excluded.
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Last reviewed: 2026-08-22.