Gratuity Calculator
Know exactly how much gratuity you are entitled to. Enter your last drawn Basic + DA salary and years of continuous service — our calculator applies the official Payment of Gratuity Act formula instantly, with a full tax exemption check included.
Enter Your Details
Your gratuity after 10 years of service
₹2.88L
48% of your annual salary
Annual Salary
₹6,00,000
Per Year of Service
₹28,846
Salary Equivalent
5.8 months
Formula Breakdown
(Salary × 15 × Years) ÷ 26Last Drawn Salary
₹50,000
Basic + DA
Days per Year
× 15
Fixed by law
Years of Service
× 10
Rounded down
Working Days/Month
÷ 26
Fixed by law
Gratuity vs Annual Salary
Gratuity is 48% of one year's salary
What is Gratuity?
Gratuity is a statutory, lump-sum retirement benefit paid by an employer to an employee as recognition for long and faithful service. It becomes payable when an employee leaves an organisation — whether through resignation, retirement, retrenchment, or in the unfortunate event of death or permanent disability. Unlike a provident fund, gratuity is funded entirely by the employer — the employee contributes nothing.
In India, gratuity is governed by the Payment of Gratuity Act, 1972, which mandates that every establishment employing 10 or more persons must pay gratuity to eligible employees. Once a company crosses this threshold, the Act continues to apply even if the headcount later falls below 10.
The fundamental eligibility condition is a minimum of 5 continuous years of service with the same employer. This 5-year rule is strict — leave before completing five full years and you forfeit the entire gratuity entitlement, except in cases of death or permanent disability where the law waives this threshold.
How Gratuity is Calculated in India
The gratuity calculation formula under the Payment of Gratuity Act, 1972 is straightforward but precise.
Complete a minimum of 5 continuous years of service with the same employer. Breaks in service due to temporary layoffs, sickness, or authorised leave generally do not break continuity.
At the time of separation — retirement, resignation, retrenchment, or death/disability — the employer calculates your gratuity based on your last drawn Basic Salary + Dearness Allowance (DA). HRA, bonus, and other allowances are excluded.
The formula prescribed by the Payment of Gratuity Act is: Gratuity = (Last Drawn Salary × 15 × Years of Service) ÷ 26. 15 = days of wages per year of service, 26 = working-days divisor.
Years of service is always rounded down to the nearest completed year. 12 years and 8 months counts as 12 years only.
The employer must pay within 30 days of it becoming due. Delayed payment attracts 10% p.a. simple interest. The Act caps statutory gratuity at ₹20 lakh.
Gratuity Eligibility & Key Rules
Understanding who qualifies, how the eligible salary is defined, and what the tax implications are will help you make smarter decisions about when to leave a job.
Minimum 5 Years of Continuous Service
You must complete at least 5 full years of uninterrupted service with the same employer. Employees who leave before 5 years receive no gratuity — except in cases of death or permanent disability, where the 5-year rule is waived.
Salary Defined as Basic + DA Only
The 'last drawn salary' in the gratuity formula means Basic Salary + Dearness Allowance (DA) only. HRA, bonuses, commissions, and all other components are excluded. A low Basic component directly reduces your gratuity entitlement.
Applicable Establishments Under the Act
The Act applies to all factories, mines, shops, and establishments employing 10 or more persons. Once covered, an establishment remains under the Act even if headcount later drops below 10.
Tax Exemption Up to ₹20 Lakh
For employees covered under the Act, gratuity is fully tax-free up to ₹20 lakh. Any amount above this is taxable as income. Claim relief under Section 89 by filing Form 10E before submitting your ITR.
Gratuity vs EPF vs Leave Encashment
Gratuity is one of three major exit benefits for Indian salaried employees. Here is how they compare.
| Feature | Gratuity | EPF | Leave Encashment |
|---|---|---|---|
| Eligibility | Min 5 years | From day 1 | Accrues yearly |
| Formula | (Sal × 15 × Yrs) ÷ 26 | 12% of basic + DA | Earned days |
| Tax-Free Limit | ₹20 lakh | ₹2.5L/yr | ₹3 lakh |
| When Paid | On exit after 5 yrs | Retirement / age 58 | On separation |
| Who Contributes | 100% employer | Employee + employer | 100% employer |
| Statutory Cap | ₹20 lakh | No limit | ₹3L tax-free |
How to Use This Gratuity Calculator
Enter Your Last Drawn Basic + DA Salary
Type in your monthly Basic Salary plus Dearness Allowance (DA) — this is the salary figure used in the official gratuity calculation formula. Do not include HRA, LTA, performance bonuses, or any other allowances. If you are unsure of your Basic, check your latest pay slip under the 'Basic' or 'Basic + DA' line.
Enter Your Total Years of Continuous Service
Input the number of complete years you have worked without interruption at the same employer. The gratuity calculator uses only completed years — if you have worked 9 years and 10 months, enter 9. Career breaks or changes of employer reset the service clock, so count only your current unbroken tenure.
Understand the Fixed Legal Parameters
The Payment of Gratuity Act fixes two constants that cannot be changed: 15 days of salary per completed year of service, and 26 as the working-days divisor for a month. These are displayed in the calculator for full transparency — there is no discretion here. Every employer covered under the Act must use exactly these numbers.
See Your Exact Gratuity Entitlement
The calculator instantly applies the formula: Gratuity = (Basic + DA × 15 × Years) ÷ 26 and shows your precise rupee entitlement. You will also see how the gratuity compares to your annual salary — useful context for evaluating the financial impact of leaving at different career milestones.
Review Your Tax Exemption Status
Gratuity up to ₹20 lakh is completely tax-free for employees covered under the Payment of Gratuity Act. If your calculated amount exceeds this ceiling, the calculator highlights the taxable portion and prompts you to explore Section 89 relief — which can significantly reduce the effective tax burden by spreading it across your service years.
6 Tips to Maximise Your Gratuity Payout
Negotiate a Higher Basic Salary
Since the gratuity formula uses only Basic + DA, a salary structure with a higher Basic component directly increases your gratuity payout at the time of exit. When evaluating job offers, compare not just the CTC but the Basic component — a ₹5,000 higher Basic translates to roughly ₹2,885 extra in gratuity for every year of service. Over a 15-year career, this difference becomes substantial.
Time Your Resignation Around Completed Years
Gratuity is calculated on completed years only — partial years do not count. If you have worked 11 years and 8 months, you receive gratuity for 11 years. Waiting just 4 more months to complete the 12th year can add a full year's gratuity — which for a senior employee could mean an additional ₹25,000–₹80,000 or more, depending on salary.
Never Leave Before 5 Years Without a Plan
Exiting before 5 continuous years means forfeiting your entire gratuity — there is no partial payout. If you are at 4 years and 6 months, the incremental value of staying another 6 months is enormous. Calculate your exact gratuity entitlement at the 5-year mark using this calculator before making your decision to leave.
Claim Section 89 Relief If Gratuity Exceeds ₹20 Lakh
If your gratuity crosses the ₹20 lakh tax-free ceiling, the surplus is added to your income for that year and taxed at your slab rate — which can be a significant hit. File Form 10E before submitting your Income Tax Return to claim Section 89 relief. This relief re-computes your tax by spreading the gratuity across the years it was earned, reducing the effective tax rate considerably.
Check Whether Your Employer Is Covered Under the Act
If your company employs fewer than 10 people, the Payment of Gratuity Act may not apply, though some employers still pay gratuity voluntarily. In such cases, employers often use an alternative formula: (Last Salary × 15 × Years) ÷ 30 instead of ÷ 26. Confirm with your HR which formula is used so your gratuity expectation is accurate.
Factor Gratuity Into Your Retirement Corpus Goal
Gratuity is a meaningful lump-sum that forms part of your retirement corpus alongside EPF, NPS, and personal investments. Use this calculator to project your gratuity at retirement, then combine that figure with your EPF and investment projections to understand your complete retirement readiness. Many Indians underestimate gratuity — for a 30-year career, it can amount to ₹12–₹30 lakh or more.
Gratuity Calculator — Frequently Asked Questions
Under the Payment of Gratuity Act, 1972, an employee must complete a minimum of 5 continuous years of service with the same employer to qualify for gratuity. This 5-year rule applies regardless of the reason for leaving — resignation, retirement, or retrenchment. The only exceptions are death and permanent disability: in these cases, the 5-year threshold is waived entirely, and gratuity is paid based on the actual length of service rendered, even if it is less than 5 years.
Disclaimer: These tools provide estimates based on the inputs provided. Results are for educational purposes only and should not be considered financial advice. Please consult a qualified financial advisor for personalized guidance.