Gratuity Calculator

How Gratuity is Calculated in India

Gratuity is a statutory retirement benefit paid by an employer to an employee as a reward for long-term continuous service. In India, gratuity is governed by the Payment of Gratuity Act, 1972 and is applicable to organizations employing 10 or more employees.

Standard Gratuity Formula:
(Last Drawn Salary × Years of Service × 15) ÷ 26

• Last Drawn Salary: Basic Salary + Dearness Allowance (DA) received in the final month of employment.
• Years of Service: Number of completed years worked with the same employer.
• 15 Days: Gratuity is calculated at 15 days’ salary for each completed year of service.
• 26 Days: The law assumes 26 working days in a month (excluding weekly offs).

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Eligibility Rules

• An employee must complete at least 5 years of continuous service to be eligible for gratuity in most cases.
• The 5-year condition is waived in case of death or permanent disablement.
• Service of 4 years and 240 days is often treated as 5 years by many employers and courts.

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Gratuity Limit & Taxation

• The maximum gratuity payable under current rules is capped at ₹20,00,000.
• For most salaried employees, gratuity up to ₹20 lakh is tax-exempt under Section 10(10) of the Income Tax Act.
• Any amount received beyond the exempt limit may be taxable as per income tax rules.

Note: This calculator provides an estimate based on standard rules. Actual gratuity paid may vary depending on company policy, employment contract, or specific court rulings.