Free Gratuity Calculator

The gratuity formula, step by step

For an employer covered by the Payment of Gratuity Act, gratuity equals last drawn basic plus DA, multiplied by 15, divided by 26, multiplied by the years of service. The 15 stands for fifteen days of wages for each year worked, and 26 stands for the working days in a month, since the Act leaves out four Sundays.

Take a monthly basic plus DA of ₹50,000 and service of 7 years and 7 months. A final part-year of more than six months counts as a full year, so the service rounds up to 8 years. Gratuity comes to ₹50,000 × 15 ÷ 26 × 8, which works out to about ₹2,30,769.

If the same person had worked 7 years and exactly 6 months, the extra months would not round up, and the calculation would use 7 years instead.

When your employer is not covered by the Act

Smaller employers that fall outside the Act may still pay gratuity under their own policy or your contract. In that case a common method divides by 30 instead of 26, since it treats a month as thirty days, and counts only completed years. Extra months are ignored.

With the same ₹50,000 and 7 years 7 months, this method gives ₹50,000 × 15 ÷ 30 × 7, or ₹1,75,000. Your employer policy may differ, so read it before you rely on this figure.

Eligibility and the upper limit

Gratuity becomes payable after a minimum period of continuous service with the same employer. The calculator checks your completed years against that minimum and tells you if you are not eligible yet. The minimum does not apply when service ends because of death or disablement, and courts have read the service rules differently in some cases, so confirm edge cases with HR.

Gratuity under the Act also has an upper limit. When the formula gives more than that limit, the calculator shows the capped amount and says so. The result card shows the limit currently in use.

Gratuity received under the Act is tax-free up to a limit, and any amount above it is taxed as salary. Tax rules for government and private employees differ, so verify the tax side with your CA.

What counts as salary for gratuity

Only basic pay and dearness allowance count. HRA, conveyance, special allowance, overtime and bonus are left out. If your basic is a small share of your CTC, your gratuity will be lower than a quick look at your total pay suggests.