Gratuity Calculator

How to use the Gratuity Calculator

Gratuity is a lump-sum amount paid by your employer as a token of appreciation for your long-term service. It is governed by the Payment of Gratuity Act, 1972 (now under the Code on Social Security).

• Enter your last drawn monthly basic salary plus dearness allowance (DA).
• Enter your date of joining and date of leaving.
• Choose whether your employer is covered under the Payment of Gratuity Act.
• The calculator shows total gratuity payable, years considered after rounding, and whether the statutory cap applies.

Formula for calculating gratuity

Gratuity in India is calculated using the formula: (Last Drawn Salary × 15 × Years) ÷ 26 under the Payment of Gratuity Act, 1972.

For employees covered under the Act, part of service beyond 6 months in the last year is counted as a full year. For employees not covered, the divisor is 30 (calendar days in a month).

Examples for calculating gratuity

Example 1: 15 years with last drawn salary of ₹30,000 — Gratuity = (15 × 30,000 × 15) ÷ 26 = ₹2,59,615. Maximum gratuity is ₹20 lakh for private sector; ₹25 lakh for Central Government employees.

Example 2: 7 years, ₹30,000 salary (not covered) — Gratuity = (15 × 30,000 × 7) ÷ 30 = ₹1,05,000.

Example 3: 10 years 7 months, ₹75,000 salary — tenure exceeds 6 months so it rounds to 11 years: (15 × 75,000 × 11) ÷ 26 = ₹4,75,962.

Example 4: 4 years 8 months, ₹40,000 — may qualify under the 240-day rule; if eligible, gratuity = (15 × 40,000 × 5) ÷ 26 = ₹1,15,385.

Difference between covered & not covered under the Gratuity Act

Understanding whether your employer is covered under the Payment of Gratuity Act, 1972, is important because it directly affects how your gratuity is calculated.

Gratuity rules in India

Gratuity is a statutory lump-sum payment by the employer for long service, governed by the Payment of Gratuity Act, 1972.

• Payable after 5 years of continuous service (on superannuation, retirement, or resignation).
• The 5-year rule does not apply in cases of death (paid to nominee/heirs) or disablement due to accident/disease.
• Under the new Labour Code (Code on Social Security), fixed-term employees may be eligible for pro-rata gratuity after 1 year of continuous service.

Who is eligible for gratuity in India?

• At least 5 years of continuous service with the employer (for resignation, retirement, or superannuation).
• The 5-year rule is waived in case of death or disablement due to accident or disease.
• Fixed-term employees may be eligible for pro-rata gratuity after 1 year under Labour Code 2025.
• The organization typically has 10 or more employees for mandatory coverage under the Act.

Taxation rules for gratuity

Government employees (central/state/local authority) — gratuity is exempt from income tax up to a maximum ceiling of ₹25 lakh.

Private sector employees whose employer is covered under the Payment of Gratuity Act — exempt up to ₹20 lakh in a lifetime.

In your entire working life, the maximum tax-exempt gratuity you may claim cannot exceed ₹20 lakh (private) or ₹25 lakh (government).

Gratuity amount investment options

Investing the gratuity amount involves considering various options based on risk appetite and investment horizon. Diversify across asset classes and review your portfolio regularly.