Gratuity Calculator

Gratuity is a statutory retirement and separation benefit unique to long service: it rewards an employee for staying with an employer for years, paid as a single lump sum when the employment ends. The Payment of Gratuity Act 1972 governs it for establishments with ten or more employees, making payment a legal obligation rather than a discretionary bonus. Eligibility turns on continuous service: you generally must complete at least five years with the same employer to qualify, a condition designed to reward retention. The five-year rule is waived only when service ends due to death or disablement, in which case gratuity is paid regardless of how long the employee had worked.

The amount, for employers covered by the Act, follows a precise formula: fifteen days of wages for each completed year of service, where a “day” of wages is computed on a 26-day working month. In practice this means your last drawn monthly basic salary plus dearness allowance, multiplied by 15/26, multiplied by your number of completed years. The use of the last drawn salary — not an average — means gratuity rises with your final salary, rewarding career progression. Years of service are rounded by a specific rule: a part-year of more than six months counts as a whole year, while six months or less is ignored, so 7 years and 7 months counts as 8 years but 7 years and 5 months counts as 7.

Two limits shape the final figure. First, only basic salary and dearness allowance count — HRA, conveyance, bonuses, and other allowances are excluded, which is why the gratuity is calculated on basic, not gross or CTC. Second, the Act caps the tax-free gratuity at ₹20 lakh; an employer may pay more, but the amount above ₹20 lakh loses the tax exemption and is taxed as salary income. Understanding gratuity matters at two moments: when changing jobs, to know what you are entitled to and whether resigning before completing five years forfeits it, and at retirement, when gratuity can be a significant part of the final settlement. This calculator gives the figure precisely so you can plan around it.

Enter your last drawn monthly basic salary. Use your most recent monthly basic pay plus dearness allowance (DA) — not your gross salary or CTC, and not including HRA or other allowances. Gratuity is calculated only on basic+DA, so entering gross would overstate the result. The figure updates as you type, with nothing submitted anywhere.

Enter your years of service. Type your total completed years with the employer, including the fractional part if relevant — for example 7.6 for seven years and about seven months. The calculator applies the rounding rule automatically: more than six months over a whole year rounds up, six months or less is dropped.

Confirm the coverage type. Most employees work for establishments covered by the Payment of Gratuity Act (ten or more employees), which uses the 15/26 formula. If your employer is not covered, switch the toggle — the non-covered basis uses 15/30 (half a month) per year, giving a slightly lower figure. When in doubt, covered is the common case.

Read the result. The calculator shows the gratuity payable, the rounded years it used, and whether the ₹20 lakh statutory cap was applied. If your computed gratuity exceeds ₹20 lakh, the displayed amount is capped at the tax-free maximum, with a note that the excess is still payable but taxable. If you have under five years of service, the result shows zero with an eligibility note, since gratuity is not payable yet.

Use it to plan a job change or retirement. Before resigning, check whether you have crossed the five-year threshold — leaving even a few months short can forfeit the entire gratuity, so the calculator helps you weigh the timing. At retirement, the gratuity figure feeds into your overall exit settlement alongside EPF and leave encashment, so knowing it in advance helps you plan the transition.