Gratuity Calculator

Gratuity is a statutory benefit paid by employers as a thank-you for long and continuous service. Under the Payment of Gratuity Act, 1972, any establishment with ten or more employees must pay gratuity to staff who leave after completing at least five years — whether through resignation, retirement, or termination. The standard formula is (15 × last drawn monthly Basic + DA × years of service) / 26, where 15 represents 15 days' wages for each completed year and 26 is the number of working days in a month.

The five-year condition is important: with rare exceptions for death or disablement, you don't become eligible until you cross that threshold with a single employer. A service period beyond six months in the final year is usually rounded up to a full year, while less than six months is rounded down. This calculator shows you the formula amount at any tenure so you can plan around it — for example, deciding whether it's worth staying a few more months to cross the next year boundary.

Gratuity also comes with a generous tax exemption. For private-sector employees covered by the Act, gratuity is tax-free up to a lifetime ceiling of ₹20 lakh; anything above that is added to your income and taxed at your slab. Government employees receive their gratuity fully tax-free. Because the payout is tied to your last drawn Basic + DA, a salary structure with a higher Basic component produces a larger gratuity — one of several reasons the split between Basic and allowances in your CTC genuinely matters over a long career.