Gratuity Calculator
Work out your gratuity under the Payment of Gratuity Act — the 15/26 formula, the five-year rule, and how much of it is tax-free.
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Gratuity is a statutory payment your employer owes you for long service. It is not a bonus and not discretionary — the Payment of Gratuity Act, 1972 makes it a legal entitlement once you have completed five years.
The formula
Gratuity = (15 × last drawn basic+DA × completed years) ÷ 26
The 15 represents fifteen days of wages for every completed year. The 26 is the number of working days in a month the Act assumes, treating Sundays as unpaid. Dividing by 26 rather than 30 makes each day worth slightly more, which is deliberate and in your favour.
Worked example. Last drawn basic plus DA of ₹50,000 a month, seven years and seven months of service:
(15 × 50,000 × 8) ÷ 26 = ₹2,30,769
The six-month rule is worth a full year
Notice that seven years and seven months counted as eight years, not seven.
Service beyond six months in the final year rounds up to a complete year. Service of exactly six months or less is dropped. On the example above, that rounding is worth ₹28,846 — leaving at seven years and five months instead of seven years and seven months costs you that much.
If you are resigning close to an anniversary, it is worth checking the date.
The five-year rule, and its exception
No gratuity is payable before five years of continuous service. Four years and eleven months earns nothing.
Courts have accepted four years and 240 days as qualifying in some cases, on the reasoning that 240 days constitutes a year of continuous service under the Act. This is not universally applied and depends on your establishment and the jurisdiction. Do not plan a resignation around it.
The five-year condition is waived entirely if service ends because of death or disablement.
Tax: the ₹20 lakh cap is an exemption, not a limit
Gratuity received is exempt from tax up to ₹20,00,000 for non-government employees. Above that, the excess is taxable as salary income.
Two things people get wrong here. First, the cap is a lifetime limit across all employers, not per job — if you received ₹8 lakh of exempt gratuity at a previous employer, only ₹12 lakh remains exempt. Second, an employer may pay more than the formula produces; the Act sets a floor, not a ceiling. Anything above the statutory amount is taxable regardless of the cap.
Who is covered
The Act applies to establishments with ten or more employees. Once covered, an establishment stays covered even if headcount later falls below ten.
If your employer is not covered by the Act, gratuity may still be payable under your contract, but the formula is usually (15 × last drawn salary × years) ÷ 30 rather than ÷ 26, and the exemption calculation differs. Check your appointment letter.
Gratuity Calculator — frequently asked questions
What is the gratuity formula in India?
Gratuity = (15 × last drawn basic + DA × completed years of service) ÷ 26. The 15 is fifteen days of wages per year of service and the 26 is the working days per month the Payment of Gratuity Act assumes. On ₹50,000 basic+DA with 8 counted years, that is (15 × 50,000 × 8) ÷ 26 = ₹2,30,769.
Do 7 years and 7 months count as 7 years or 8?
Eight. Service of more than six months in the final year rounds up to a full year; six months or less is dropped. On ₹50,000 basic that rounding is worth ₹28,846, so if you are resigning near an anniversary the exact date matters. Seven years and five months would count as seven.
Can I get gratuity before completing 5 years?
Generally no — five years of continuous service is the statutory condition, and four years and eleven months earns nothing. Courts have accepted four years plus 240 days in some cases on the basis that 240 days constitutes a year of continuous service, but this is not applied uniformly and should not be planned around. The five-year rule is waived entirely if service ends due to death or disablement.
Is gratuity taxable?
It is exempt up to ₹20,00,000 for non-government employees, and the excess above that is taxed as salary. Two catches: the ₹20 lakh ceiling is a lifetime limit across all employers, not per job — prior exempt gratuity eats into it — and an employer paying more than the statutory formula makes the excess taxable regardless of the cap.
Is gratuity calculated on basic salary or gross salary?
On last drawn basic plus dearness allowance only. HRA, special allowance, conveyance, bonuses and variable pay are excluded. This is why gratuity on a ₹1,00,000 monthly gross with ₹40,000 basic is calculated on the ₹40,000, not the ₹1,00,000 — a common and expensive misunderstanding when estimating an exit payout.
Which employers have to pay gratuity?
The Payment of Gratuity Act covers establishments employing ten or more people, and once covered an establishment remains covered even if headcount later drops. If your employer falls outside the Act, gratuity may still be payable under your contract, but the divisor is usually 30 rather than 26 and the exemption is computed differently. Your appointment letter is the place to check.
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Results from this calculator are estimates for informational use only — not financial, medical, or professional advice. Read our full disclaimer before acting on any number you see here.