What is a gratuity Calculator?
Gratuity is a lump sum your employer pays as a thank-you for continuous service, mandatory once you’ve completed 5 years with an employer covered under the Payment of Gratuity Act, 1972 (most establishments with 10+ employees). It’s calculated purely from your last drawn Basic + DA and total years of service — your other salary components don’t factor in.
Enter your last drawn monthly Basic + DA and total years of service to see the gratuity payable.
How gratuity is calculated
The 26 represents assumed working days in a month, and 15 is half a month’s salary per year of service — this is the formula for employees covered under the Payment of Gratuity Act. If your service in the final year is 6 months or more, it’s rounded up to a full year.
Worked example: how tenure and salary both drive the number
On a ₹80,000 last-drawn Basic + DA, gratuity works out to roughly ₹2,30,769 after 5 years of service, ₹4,61,538 after 10 years, ₹6,92,308 after 15 years, and ₹11,53,846 after 25 years — growing in a straight line with years of service, since the formula is linear in tenure for a fixed salary.
The ₹20 lakh cap only becomes relevant at a combination of high salary and long tenure: a ₹3,00,000 last-drawn salary over 25 years computes to roughly ₹43,26,923 under the formula, but the Act caps actual payable gratuity at ₹20,00,000 regardless — more than half the formula-computed amount is never actually paid out once the cap binds.
What counts as "salary" for this calculation
Only Basic + Dearness Allowance (DA) counts — not your full CTC, and not other components like HRA, special allowance, or bonus. This is a common point of confusion: someone earning a ₹1,50,000 CTC with a ₹60,000 Basic will have their gratuity calculated on ₹60,000, not ₹1,50,000, since Basic + DA is a meaningfully smaller number than total compensation for most salary structures.
Frequently asked questions
Do I qualify for gratuity if I resign before 5 years?
Generally no — 5 years of continuous service is the minimum threshold under the Act, except in cases of death or disablement, where the 5-year requirement is waived.
Is gratuity taxable?
For employees covered under the Act, gratuity is tax-exempt up to ₹20 lakh (a limit last revised in 2019) — anything received above that ceiling is taxable as salary income. Confirm the current exemption limit, since it has been revised before.
Is there a cap on the gratuity amount itself?
Yes, separately from the tax-exemption limit, the Act itself caps payable gratuity at ₹20 lakh, regardless of what the formula computes for very long tenures or high salaries.
Does the formula differ for employees not covered under the Act?
Yes — for employees at organisations not covered by the Payment of Gratuity Act, a similar but distinct formula is often used, based on 15 days’ salary per year using a 30-day month instead of 26, giving a marginally different result. This calculator assumes the Act-covered formula, the more common case.
Does gratuity apply to contract or part-time employees?
Coverage generally depends on being a direct employee of an establishment covered under the Act, meeting the 5-year continuous service requirement — contract staff employed via a separate contracting agency are typically governed by that agency’s own terms rather than the client company’s gratuity policy.
Is gratuity paid immediately on leaving, or does it take time?
Employers are required to pay gratuity within 30 days of it becoming due (on resignation, retirement, or termination) — delayed payment can attract interest, payable by the employer.
Does a break in service (like a sabbatical) affect the 5-year count?
It depends on how the break was recorded — authorised leave, layoff, or a strike generally doesn’t break continuity of service, while an unauthorised absence or a genuine gap in employment can. Check with your HR team if you’ve had a career break and are close to the 5-year threshold.