Gratuity Calculator
Calculate gratuity using the formula (15 × Last Drawn Salary × Years of Service) / 26. Check eligibility instantly.
What is Gratuity Calculator?
A gratuity calculator computes the lump-sum payment an employee receives from their employer upon completing 5 or more years of continuous service in India. Gratuity is governed by the Payment of Gratuity Act, 1972, and is calculated using the formula: (15 × last drawn salary × years of service) / 26. The 'salary' includes basic pay plus dearness allowance. The maximum gratuity payable is ₹20 lakh (tax-free up to this limit). Understanding your gratuity entitlement helps with retirement planning and evaluating the true value of long-term employment.
How It Works
Enter your last drawn monthly salary (basic + DA) and total years of service. The tool applies the formula: Gratuity = (15 × monthly salary × completed years) / 26. The divisor of 26 represents working days in a month, and the multiplier of 15 represents half a month's salary for each year served. Service over 6 months in the final year rounds up to a full year. The tool also shows eligibility status (minimum 5 years required) and the tax-free limit applicability.
Common Use Cases
- •Estimating gratuity entitlement when planning to resign or retire from a long-term position
- •Calculating the financial benefit of staying with an employer to complete 5 years for eligibility
- •Verifying employer's gratuity calculation during separation or retirement processing
- •Including gratuity in total compensation analysis when comparing job offers
- •Planning retirement corpus by factoring in expected gratuity from current employment
- •Understanding the tax-free limit and planning around the ₹20 lakh maximum exemption
Frequently Asked Questions
Who is eligible for gratuity?▼
Employees who have completed at least 5 years of continuous service with an organization.
How is gratuity calculated?▼
For employees covered by the Payment of Gratuity Act, the formula is (15 × last drawn salary × years of service) ÷ 26, where salary means basic plus dearness allowance and 26 represents working days in a month. For uncovered employees a 15/30 basis is used instead.
Who is eligible and how is service rounded?▼
Generally five years of continuous service with the same employer, waived if service ends through death or disablement. Part years are rounded to the nearest whole year, so six months or more counts up: 7 years 7 months is treated as 8 years, while 7 years 5 months is 7.
Is gratuity taxable?▼
It is exempt up to a lifetime ceiling of ₹20 lakh for private-sector employees covered by the Act, with the exemption being the least of the statutory formula, the amount actually received, and that ceiling. Anything above is taxable as salary. Government employees receive full exemption.
Does the five-year rule have exceptions?▼
Yes. It does not apply where employment ends because of death or permanent disablement, in which case gratuity is payable regardless of length of service. Some courts have also held that 4 years and 240 days counts as five years for this purpose.
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