How the Gratuity Calculator works
Gratuity is a lump-sum, one-time payment an employer owes an employee as a reward for continuous service, paid out on retirement, resignation, superannuation, or termination (and, without any minimum tenure, on death or disablement). In India this calculator follows the formula set out in the Payment of Gratuity Act, 1972, which governs employers with 10 or more employees.
The formula
For employees covered by the Act:
Gratuity = 15 × Last drawn monthly salary × Years of service ÷ 26
For employees not covered by the Act, employers commonly use the same structure with 30 in place of 26:
Gratuity = 15 × Last drawn monthly salary × Years of service ÷ 30
"Last drawn monthly salary" means Basic pay plus Dearness Allowance (DA) at the time of leaving — it excludes HRA, bonuses, commissions, and other allowances. The 26 (or 30) represents the working days used to convert a monthly salary into a daily rate, and 15 is the number of days' wages credited for each completed year of service.
Rounding years of service
For employees covered under the Act, the number of years used in the formula is rounded: if the service in the final year is 6 months or more, it rounds up to the next full year; if it is less than 6 months, it rounds down. For example, 10 years and 7 months rounds to 11 years, while 10 years and 4 months rounds to 10 years. This calculator applies that rule when "Covered under the Act" is set to Yes, and uses a straight fractional year (years plus months ÷ 12) when set to No.
Worked example
Take a last drawn salary (Basic + DA) of ₹50,000, with 10 years and 6 months of service under an employer covered by the Act. The extra 6 months round the service up to 11 qualifying years. The per-year amount is 50,000 × 15 ÷ 26 ≈ ₹28,846. Multiplied by 11 years, the gratuity works out to roughly ₹3,17,308 — well under the statutory cap.
Eligibility and the statutory cap
Gratuity is payable only after 5 years of continuous service with the same employer, except when service ends due to death or disablement, in which case the 5-year requirement is waived entirely. Under the 2018 amendment to the Act, the maximum gratuity payable is capped at ₹20,00,000; any amount an employer chooses to pay above that is treated as an ex-gratia payment rather than a statutory entitlement, and may be taxed differently. This calculator applies the cap automatically to the headline figure.
What this calculator does not cover
This tool computes the statutory formula only. It does not account for state-specific variations, employer gratuity schemes that pay more than the statutory minimum, group gratuity insurance rules, or the tax treatment of gratuity received (which differs for government versus private-sector employees and interacts with the lifetime exemption limit). For a final figure tied to your employment contract, confirm with your employer's HR or payroll team.