Gratuity Calculator
Calculate gratuity payout under the Payment of Gratuity Act using the 15/26 formula. Compare covered vs non-covered employees and statutory caps in your browser.
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How to use Gratuity Calculator
- 1
Enter your last drawn basic salary and Dearness Allowance (DA).
- 2
Input your service tenure in years and additional months.
- 3
Choose whether your organization is covered under the Payment of Gratuity Act.
- 4
Instantly review your estimated gratuity payout and step-by-step formula breakdown.
Capabilities
- Differentiates between covered (15/26) and non-covered (15/30) formulas
- Applies the 6-month rounding rule for qualifying service under the Act
- Enforces the private-sector statutory tax-exempt cap of ₹20 Lakh
- Shows the exact mathematical calculation steps
How Statutory Gratuity Is Calculated in India
Gratuity is a statutory lump-sum financial benefit paid by an employer to an employee in recognition of long-term continuous service. Governed by the Payment of Gratuity Act, 1972, it applies to factories, mines, ports, oilfields, and commercial establishments employing 10 or more workers.
Under Section 4(1) of the Act, gratuity becomes payable upon termination of employment after rendering continuous service for not less than 5 years. Calculations assume standard covered establishment employment.
The Act considers 26 working days in a month (excluding 4 Sundays). Gratuity equals 15 days of last-drawn salary for every completed year: (15 / 26) * (Basic + DA) * Service Years.
For covered employees, any fractional service period exceeding 6 months is rounded up to the next full completed year (e.g., 9 years and 8 months becomes 10 years).
Worked Gratuity Calculation Example
Suppose an employee covered under the Act resigns after 12 years and 7 months of continuous service with a last drawn Basic Salary + DA of ₹65,000:
Tenure Rounding: 12 years and 7 months > 6 months, rounding UP to 13 years
Daily Wage Rate (15/26): (₹65,000 * 15) / 26 = ₹37,500
Total Gratuity Payout: ₹37,500 * 13 = ₹4,87,500
The entire ₹4,87,500 is completely tax-exempt under Section 10(10) (well below the ₹20 Lakh statutory ceiling).
Formula rules, eligibility conditions, and statutory tax exemption thresholds are verified against theMinistry of Labour & Employment, Payment of Gratuity Act, 1972.
To estimate total post-retirement living costs and monthly SIP requirements, use Retirement Calculator.
This tool operates in a sandbox directly inside your web browser. All parsing, processing, and downloads are rendered locally. Your file size, metadata, and contents never cross the network. It works completely offline.
Frequently Asked Questions
How is gratuity calculated for employees covered under the Act?
For employees covered under the Payment of Gratuity Act, 1972, the statutory formula is: Gratuity = Last Drawn (Basic + DA) * (15 / 26) * Completed Years of Service.
How are fractional or partial years of service treated?
Under the Gratuity Act, if the fractional period of service exceeds 6 months, it is rounded UP to the next full year. For example, 7 years and 7 months is calculated as 8 full years. If the fraction is 6 months or less, it is rounded down.
Is 5 years of continuous service always required to receive gratuity?
Generally, yes. A minimum of 5 years of continuous service with an employer is mandatory for gratuity eligibility. However, this 5-year requirement is waived in the event of an employee's death or permanent disablement.
What salary components are included in gratuity calculation?
Only your last drawn Basic Salary and Dearness Allowance (DA) are included. Other allowances like HRA, special allowance, medical reimbursements, and performance incentives are excluded.
What is the statutory maximum tax-free limit for gratuity in India?
Under Section 10(10) of the Income Tax Act, the statutory tax-free exemption limit for gratuity received by private-sector employees under the Act is ₹20,00,000 (₹20 Lakh). Central Government employees have a ceiling of ₹25,00,000.