Gratuity Calculator
Estimate your gratuity payout based on years of service, last drawn salary, and applicable labor law formulas.
Formula
Gratuity = (Basic + DA) × 15 × Years / 26
Basic + DA is last drawn salary, 15 represents 15 days wages per year of service, and 26 is working days per month. Months ≥6 are rounded up to next year.
Worked Examples
Example 1: Standard 10-Year Service Calculation
Problem:Employee with Basic ₹50,000 + DA ₹10,000, completing 10 years and 6 months of service.
Solution:Last Drawn Salary = Basic + DA = ₹50,000 + ₹10,000 = ₹60,000 Years of Service: 10 years 6 months Since 6 months = 6 (exactly 6 counts as additional year) Rounded to: 11 years Gratuity = (Salary × 15 × Years) ÷ 26 = (60,000 × 15 × 11) ÷ 26 = 99,00,000 ÷ 26 = ₹3,80,769 Tax status: Below ₹20 lakh, fully exempt.
Result:₹3,80,769 (tax-free)
Example 2: High-Salary Long-Service Employee
Problem:Senior executive with Basic ₹2,50,000 + DA ₹50,000, 25 years of service.
Solution:Last Drawn Salary: ₹3,00,000 Years: 25 Gratuity = (3,00,000 × 15 × 25) ÷ 26 = 11,25,00,000 ÷ 26 = ₹43,26,923 Tax treatment: Exempt portion: ₹20,00,000 Taxable portion: ₹43,26,923 - ₹20,00,000 = ₹23,26,923 If in 30% tax bracket: Tax on excess: ₹23,26,923 × 30% = ₹6,98,077 Net gratuity after tax: ₹36,28,846
Result:₹43.27L gross | ₹36.29L after tax
Example 3: Minimum Eligibility Scenario
Problem:Employee completes exactly 5 years with Basic ₹30,000 + DA ₹5,000.
Solution:Last Drawn Salary: ₹35,000 Years: 5 (minimum eligibility met) Gratuity = (35,000 × 15 × 5) ÷ 26 = 26,25,000 ÷ 26 = ₹1,00,962 Note: Had employee left at 4 years 11 months, gratuity = ₹0 Tax status: Well below ₹20 lakh, fully exempt. Forfeiture risk: None if resignation is voluntary without misconduct.
Result:₹1,00,962 (tax-free) – timing is crucial!
Frequently Asked Questions
What is gratuity and who is eligible to receive it?
Gratuity is a lump sum retirement benefit paid by employers to employees for long service. Eligibility: minimum 5 years of continuous service in any organization covered under Payment of Gratuity Act (10+ employees). Also payable on death or disablement regardless of service length. Applies to factories, mines, oilfields, plantations, ports, railways, shops, and establishments.
How is gratuity calculated under the Payment of Gratuity Act?
Formula: Gratuity = (Last drawn salary × 15 × Years of service) ÷ 26. Last drawn salary = Basic + Dearness Allowance. 15 represents 15 days wages. 26 represents working days per month. For piece-rated employees: average of last 3 months wages. Months exceeding 6 are rounded up to next year (10 years 7 months = 11 years).
Is gratuity taxable and what is the exemption limit?
For private sector employees covered under Payment of Gratuity Act: Exempt up to ₹20 lakh (increased from ₹10 lakh in 2019). Amount exceeding this is taxable as 'Income from Other Sources'. For government employees: Fully exempt with no upper limit. For employees not covered under Act: Exempt is least of: actual gratuity, ₹20 lakh, or (Salary × 15 × Years)/26.
What happens if I leave before completing 5 years?
You forfeit gratuity rights if you resign before completing 5 years of continuous service. However, gratuity is payable regardless of service length in cases of: death during service, disablement due to accident or disease. Some employers voluntarily pay gratuity even for shorter tenures. Termination for misconduct involving moral turpitude may forfeit gratuity even after 5 years.
How are additional months calculated in gratuity?
Service period is calculated in complete years. For additional months: If 6 months or more, it counts as a full additional year. If less than 6 months, it's ignored. Example: 10 years 7 months = 11 years for gratuity calculation. 10 years 5 months = 10 years. This rounding significantly impacts final amount - plan exit timing accordingly.
What is the difference between gratuity for government and private employees?
Government employees: Gratuity = (Basic + DA) × 15 × Years / 26 (same formula). Maximum gratuity: ₹20 lakh (but fully tax-exempt). Qualify after 5 years. Private sector: Same formula and eligibility. Maximum exempt: ₹20 lakh (amount above is taxable). Additional retirement benefits often different between sectors.
Can my employer refuse to pay gratuity?
Employers cannot refuse gratuity if you meet eligibility criteria under the Payment of Gratuity Act. Gratuity must be paid within 30 days of becoming due (resignation, retirement, death). Delay beyond 30 days attracts simple interest. You can file complaint with Controlling Authority under Gratuity Act. Only exception: termination for misconduct causing damage to employer property (gratuity forfeited to extent of damage).
What salary components are included in gratuity calculation?
Included: Basic salary, Dearness Allowance (DA). Excluded: HRA, conveyance, medical allowance, bonuses, commissions, overtime, special allowances. For monthly-rated employees, use last drawn basic + DA. For piece-rated employees, average of last 3 months' wages. If salary varies, last drawn amount is considered. Commission-based roles use average earnings.
How does the maximum gratuity limit of ₹20 lakh work?
The ₹20 lakh limit is the maximum tax-exempt amount, not maximum payable. If your calculated gratuity exceeds ₹20 lakh, employer still pays full amount. Amount up to ₹20 lakh: Tax-free. Amount above ₹20 lakh: Added to income, taxed at slab rate. For high-salary, long-service employees, taxable portion can be significant. Government employees have no such limit.
What is the timeline for receiving gratuity payment?
Employee must apply for gratuity within 30 days of it becoming due. Employer must determine and pay within 30 days of application. Interest at 10% per annum applies if employer delays beyond 30 days. If dispute arises, Controlling Authority (Labour Commissioner) resolves it. In case of death, nominee/legal heir receives payment. Unclaimed gratuity: Keep records for 3 years from due date.