Gratuity Calculator
This gratuity calculator works out the gratuity payable to an employee under the Payment of Gratuity Act, 1972, based on your last drawn salary and completed years of service. Enter your basic pay plus dearness allowance and your total years of service to see the amount you (or an employee) are entitled to on resignation, retirement, or after five years of continuous service.
Your basic pay plus dearness allowance in the last month before leaving — not your full CTC or gross salary.
Completed years of continuous service with the employer. A period over 6 months in the final year rounds up to a full year.
Gratuity payable
₹4,15,385
The statutory gratuity amount — e.g. ₹4,15,385 for a ₹60,000 last-drawn salary and 12 years of service.
How to use this gratuity calculator
- 1Last drawn monthly salary: use basic pay plus dearness allowance only — not HRA, bonuses or other allowances, and not your full CTC.
- 2Years of service: count completed years with the employer. Under the Act, a final year worked for more than 6 months rounds up to a full year for this calculation.
- 3This formula applies to employees covered under the Payment of Gratuity Act (most establishments with 10+ employees) — company policy may differ for others.
- 4Remember gratuity is only payable after a minimum of 5 years of continuous service, except in cases of death or disability, where the 5-year rule doesn't apply.
Understanding your results
Gratuity payable is the amount due under the statutory formula. It is worth checking this figure against what your employer's HR or payroll system quotes — the statutory formula is a floor, and some employers' gratuity policies are more generous. Note also that the Income Tax Act exempts gratuity from tax up to ₹20,00,000 (for employees covered under the Act) — any amount above that cap is taxable as salary income in the year received.
The formula
Gratuity = (15 × Last Drawn Monthly Salary × Years of Service) ÷ 26The formula pays 15 days of salary for every completed year of service, using 26 as the standard number of working days in a month (the statutory convention under the Act, not a literal day count). Last drawn monthly salary means basic pay plus dearness allowance only, evaluated at the time of leaving — a salary increase in your final months directly raises the gratuity payable, since the whole calculation is anchored to that one figure.
A worked example
An employee with a last drawn salary of ₹60,000 (basic + DA) and 12 years of service: gratuity = (15 × 60,000 × 12) ÷ 26 = ₹4,15,385. A shorter-tenured employee on ₹45,000 with 8 years of service receives (15 × 45,000 × 8) ÷ 26 = ₹2,07,692. Both amounts are well under the ₹20,00,000 tax-exemption cap, so neither would owe tax on this payout.
Notes for the UK, US and India
This exact formula and the ₹20,00,000 tax-exemption cap apply specifically to India, under the Payment of Gratuity Act, 1972 and the Income Tax Act. Employees NOT covered under the Act (smaller establishments, or those outside its scope) may still receive gratuity under a different, less standardised formula set by company policy — check your specific employment terms. Outside India, gratuity in this specific statutory sense doesn't exist; the closest analogues are severance pay (UK, US) or redundancy pay, which follow entirely different rules and calculations specific to each country.
Frequently asked questions
Who is eligible for gratuity?+
Employees who have completed 5 or more years of continuous service with an employer covered under the Payment of Gratuity Act. The 5-year requirement is waived in cases of death or disability, where a shorter-service employee's nominee or the employee themself is still entitled to gratuity.
Is gratuity taxable?+
Gratuity received by employees covered under the Act is tax-exempt up to ₹20,00,000. Any amount above that cap is added to taxable salary income for that year. Government employees typically receive full exemption regardless of amount.
What counts as 'last drawn salary' for gratuity?+
Basic pay plus dearness allowance (DA) only, as of your last working day — it excludes HRA, bonuses, overtime and other allowances, even if they make up a large part of your total CTC.
Does gratuity apply if I resign versus if I'm terminated?+
Yes, gratuity is payable in both cases, as well as on retirement, provided the minimum 5-year service requirement is met. It is one of the few benefits that isn't contingent on the reason for leaving, only on tenure.
Can my employer pay more than the statutory gratuity formula?+
Yes — the statutory formula is a legal minimum, not a cap. Some employers offer more generous gratuity terms as part of their compensation policy; always check your specific employment contract or HR policy alongside this calculator's statutory figure.