Gratuity Calculator
Use our free Gratuity Calculator to estimate your gratuity payout in India based on your Basic + DA and years of service. It follows the commonly used formula under the Payment of Gratuity Act and helps you quickly understand your expected gratuity amount.
Estimate Your Gratuity Amount
Gratuity Calculation Results
Formula Breakdown
This is an estimate. Eligibility rules may differ in special cases (death/disability). For exact payout, confirm with your HR/payroll.
Compare Both Estimates
How Gratuity is Calculated in India
Gratuity is a lump-sum payment given by an employer as a thank-you for long service. In India, gratuity is governed by the Payment of Gratuity Act, 1972 for eligible establishments. For most employees, gratuity becomes payable after 5 years of continuous service (with exceptions in special cases).
Gratuity Formula (Act Covered)
Gratuity \(=\) \((\text{Basic + DA}) \times 15 \times \text{Years of Service}\) \( \div 26\)
- Basic + DA: Last drawn monthly salary (commonly used)
- 15: 15 days wage factor
- 26: Working days in a month (as per the Act’s common calculation)
How Service Years are Counted
- Months > 6: service is commonly rounded up to the next year.
- Months ≤ 6: service is usually considered as completed years only.
Why This Calculator Helps
Gratuity planning is a real money decision: it affects your emergency fund, job switch timing, and retirement plan. This calculator gives you a quick estimate you can use while negotiating offers, evaluating layoffs/notice periods, or planning a resignation.
Gratuity Calculation Example
Example for an employee covered under the Act:
- Basic Salary: ₹50,000/month
- DA: ₹0/month
- Service: 7 years
Gratuity \(=\) (₹50,000 × 15 × 7) ÷ 26 \(=\) ₹2,01,923 (approx.)
Quick Answers
What is gratuity?
Gratuity is a lump sum paid by an employer to an employee as a reward for long service. It is payable on resignation, retirement, or death after completing at least 5 years of service.
How is gratuity calculated in India?
Under the Payment of Gratuity Act: Gratuity = (Last drawn salary × 15 ÷ 26) × years of service. Salary means basic + DA. For each year, 15 days’ salary is paid.
Who is eligible for gratuity?
Employees who have completed 5 or more years of continuous service with the same employer are generally eligible. Death or disablement may have different rules.
Is gratuity taxable?
Gratuity may be fully or partially exempt depending on whether you are covered under the Payment of Gratuity Act and your employer type. Government employees get full exemption.
What is the 26 in the gratuity formula?
26 represents working days in a month (excluding weekly offs) used for the 15-days-per-year calculation under the Act.
Frequently Asked Questions
Is gratuity taxable in India?
Gratuity may be fully or partially exempt from tax depending on whether you are covered under the Payment of Gratuity Act and your employer type. For exact tax impact, use the Income Tax Calculator and consult your employer’s payroll team.
Do I need exactly 5 years to be eligible for gratuity?
In most cases, gratuity is payable after 5 years of continuous service. Some employers treat 4 years and 240 days as eligible, but practices vary. Special cases like death or disablement may have different rules.
What salary components are considered for gratuity calculation?
For most common estimates, gratuity uses Basic + DA as the last drawn salary. Components like HRA, bonus, and allowances are usually not included in the standard formula.
What is the difference between ÷26 and ÷30 in gratuity calculation?
Under the Act, gratuity is commonly calculated using 26 working days in a month. Some non-Act estimates use 30 days. This calculator shows both values so you can compare.