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Gratuity Calculator

Calculators · Added 14 August 2026

Gratuity is a statutory payment for long service, calculated from your last drawn basic pay plus dearness allowance and the number of completed years. This calculator applies the formula in the Payment of Gratuity Act, 1972, handles the five-year eligibility rule and the rounding of part-years, and flags the point at which the amount stops being tax-exempt.

Basic pay plus dearness allowance only — not CTC, not gross.

0 to 11.

Employer

How to use the gratuity calculator

  1. 1Enter your last drawn monthly salary — basic pay plus dearness allowance only. Not CTC and not gross; this is the most common mistake.
  2. 2Enter completed years of service, and the additional months separately.
  3. 3Choose whether your employer is covered by the Act. Most establishments with ten or more employees are.
  4. 4Press Calculate. If you have not yet completed five years, the result says so rather than showing a figure you cannot claim.
  5. 5Check the note under the result: it states the divisor used and how the part-year was treated.

Examples

Ten years at a covered employer

Input
₹50,000 basic + DA, 10 years of service, covered by the Act
Result
₹2,88,462 — that is 15 × 50,000 × 10 ÷ 26

The 26 is the Act's assumption of working days in a month, excluding Sundays.

A part-year that rounds up

Input
₹50,000 basic + DA, 7 years and 8 months, covered
Result
₹2,30,769 — the service counts as 8 years

Six months or more counts as a full year under the Act. Seven years and five months would have counted as seven.

An employer outside the Act

Input
₹50,000 basic + DA, 10 years, not covered
Result
₹2,50,000 — the divisor is 30 rather than 26

Same salary, same service, ₹38,462 less. The divisor is the entire difference.

About the gratuity calculator

What gratuity is meant to be

Gratuity is deferred compensation for continuous service — a lump sum that becomes payable when you leave, provided you stayed long enough. The Payment of Gratuity Act, 1972 made it a statutory entitlement rather than an employer's discretion, applying to factories, mines, plantations, shops and establishments with ten or more employees.

It becomes payable on resignation, retirement, superannuation, death or disablement, once five years of continuous service are complete. The five-year threshold is what makes gratuity a genuine retention mechanism: leaving at four years and eleven months forfeits the entire amount, which is a real consideration when timing a move.

Because it accrues against service you have already given, an employer that includes gratuity in your CTC is counting money you have not yet earned the right to. That is not improper, but it does mean the CTC figure overstates what you will receive if you leave early.

The details that change the number

Three inputs decide the result, and two of them are frequently entered wrong. The salary must be basic plus dearness allowance, because that is what the Act defines as wages for this purpose — using gross or CTC produces a figure that is not merely optimistic but structurally wrong.

The second is the divisor. Covered employers use 26, on the reasoning that a month contains 26 working days once Sundays are excluded; employers outside the Act conventionally use 30. On a ₹50,000 salary over ten years that difference is worth ₹38,462, for identical work.

The third is how part-years are treated. Under the Act, a part-year of six months or more rounds up to a full year and anything less is dropped, so seven years and eight months counts as eight while seven years and five months counts as seven. A few months either side of a service anniversary can therefore be worth a full year's gratuity — one of the rare cases where the exact date of a resignation letter has a direct financial consequence worth calculating before sending it.

Frequently asked questions

Which salary figure do I enter?
Last drawn basic pay plus dearness allowance, monthly. Not CTC, not gross, and not including HRA, bonuses or allowances. Entering gross salary is the single most common error and inflates the result substantially — often by two to three times.
Do I really need five years?
Yes for the statutory entitlement, with one exception: the five-year requirement is waived where employment ends because of death or disablement. Courts have taken differing views on whether four years and some months can qualify in specific circumstances, and some employers pay a gratuity-like benefit earlier as a matter of contract — that would be governed by your offer letter rather than the Act.
Why 15 and 26?
The Act provides fifteen days' wages for every completed year of service, and takes a month as 26 working days rather than 30 on the basis that Sundays are not working days. Dividing the monthly salary by 26 gives a daily wage; multiplying by fifteen gives the fifteen days. Employers outside the Act's scope conventionally use 30, which produces a lower figure for identical service.
Is gratuity taxable?
For non-government employees covered by the Act, gratuity is exempt up to ₹20 lakh, counted cumulatively across your working life rather than per employer. Anything above that is normally taxable as salary income. Government employees receive it fully exempt. The calculator flags when a result crosses the ceiling, but your actual position depends on gratuity received previously.
Can my employer pay more than the formula?
Yes. The Act sets a floor, not a ceiling — an employer may pay more under contract or policy, and many do for senior roles. The ₹20 lakh limit governs the tax exemption, not the amount that may be paid. This calculator estimates the statutory minimum, which is the amount you can insist on.

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