Gratuity is a lump-sum payment an employer makes to an employee as a gesture of appreciation for long, continuous service. In India it is governed by the Payment of Gratuity Act, 1972, which applies to establishments with 10 or more employees. You become eligible after completing 5 years of continuous service with the same employer — and the requirement is waived entirely if service ends due to death or disablement.
The statutory formula is straightforward: take your last drawn basic salary plus dearness allowance, multiply by 15, divide by 26, and multiply by your completed years of service. The 15 stands for 15 days’ wages for each completed year, and 26 represents the working days in a month.
Gratuity must be paid within 30 days of becoming due, and delayed payments attract simple interest — the law is firmly on the employee’s side. Tax treatment depends on who you work for: government employees enjoy full exemption, while private-sector employees get exemption up to a government-set limit that is revised from time to time, with anything above it taxable as salary income.
This calculator applies the statutory formula to your numbers and gives an estimate of your gross gratuity payout. It is useful when resigning, retiring or negotiating a full-and-final settlement, so you know roughly what should arrive in your account — and can spot it quickly if the figure your employer quotes looks too low.
How it works
The tool takes your last drawn basic salary plus dearness allowance — not your full CTC, and not bonuses, overtime or other allowances, which the Act excludes. It multiplies that figure by 15 days divided by 26 working days, which gives the gratuity earned for a single year of service. Using only basic plus DA is important: plugging in your CTC would inflate the result well beyond what the law actually provides.
Next, the per-year figure is multiplied by your completed years of service, with any service period beyond 6 months in a year rounded up to a full year. For example, 7 years and 8 months counts as 8 years, while 7 years and 4 months counts as 7. This rounding rule applies to both eligibility and the payout calculation.
The result is your gross gratuity before tax. The calculator deliberately does not apply the tax exemption, since that depends on the government-set exempt limit in force and whether you work for the government or a private employer. Check the current exemption rules or ask a tax advisor before assuming how much of the payout you will actually keep.
How to use this tool
- Enter your last drawn monthly basic salary plus dearness allowance.
- Enter your total years and months of continuous service.
- Any service beyond 6 months in a year counts as a full year.
- Click Calculate to see your estimated gross gratuity amount.
- Compare the result with your employer's figure at full-and-final settlement.
- Check the current tax exemption limit to estimate the tax-free portion.
Practical tips
- Use only basic salary plus DA in the calculation — bonuses, overtime and other allowances are excluded under the Act, and using CTC inflates the result.
- Service rounding matters: 5 years and 7 months counts as 6 years, but 5 years and 5 months counts as 5 — check your exact service dates.
- Resignation, retirement and retrenchment all qualify after 5 years, so you do not lose gratuity by resigning rather than retiring.
- If payment is delayed beyond 30 days, you are entitled to simple interest — follow up in writing and approach the Controlling Authority if needed.
Frequently asked questions
Am I eligible for gratuity after 4 years and 8 months?
Yes, in most cases. Under the Act, service beyond 6 months in a year counts as a full year, so 4 years and 8 months is treated as 5 years of continuous service — meeting the eligibility threshold. The 5-year requirement is also waived entirely if service ends due to death or disablement during employment.
Is gratuity taxable in India?
For government employees, gratuity is fully exempt from tax. For private-sector employees covered by the Act, the exempt amount is the least of three figures: the actual gratuity received, 15 days' wages per completed year of service, and the government-set limit — currently ₹20 lakh, though this ceiling is revised from time to time.
What if my employer refuses to pay gratuity?
Gratuity must be paid within 30 days of becoming due. If your employer delays or refuses, you can file a claim with the Controlling Authority appointed under the Act in your region. Delayed payments attract simple interest, so the law is firmly on the employee's side — keep your appointment letter and service records as proof of employment.
Does the calculator work for employees not covered by the Act?
The standard 15/26 formula applies to employees covered under the Payment of Gratuity Act. For those not covered, many employers voluntarily use 30/26 — a month's wages per year of service — as a fair practice, but it is not a legal requirement. Check your appointment letter or HR policy to confirm which formula your employer follows.
Is gratuity payable if I resign before completing 5 years?
No. Resignation before completing 5 years of continuous service does not create a gratuity entitlement under the Act. The only exceptions are death or disablement during service, where the 5-year condition is waived. If you are close to the threshold, the timing of your exit can matter — discuss it with HR before putting in your papers.
Can my employer reduce or forfeit my gratuity?
Only in very limited circumstances. Gratuity can be wholly or partly forfeited if your service was terminated for misconduct that caused damage or loss to the employer, or for acts involving moral turpitude. Ordinary resignation, retirement or retrenchment after 5 years cannot be used as a reason to cut your gratuity.
Note: Estimates for planning only; tax exemption limits are revised by the government from time to time and this is not financial advice.