indian gratuity calculator

What Is Gratuity?

Gratuity is a lump-sum benefit paid by an employer to an employee as a token of appreciation for long and continuous service. In India, gratuity is governed primarily by the Payment of Gratuity Act, 1972 for eligible establishments and employees.

It is typically paid when an employee leaves the organization due to resignation, retirement, superannuation, or in unfortunate cases such as death or disablement (subject to legal provisions).

Indian Gratuity Formula

1) Employees Covered Under the Payment of Gratuity Act

The commonly used formula is:

Gratuity = (Last Drawn Salary × 15 × Years of Service) ÷ 26

• Last Drawn Salary usually means Basic + DA.
• 15 represents 15 days’ wages for every completed year of service.
• 26 represents working days in a month for this legal formula.
• If additional service is more than 6 months, it is generally rounded to the next year for calculation.

2) Employees Not Covered Under the Act

A common approximation used is:

Gratuity = (Last Drawn Salary × 15 × Years of Service) ÷ 30

Some employers may follow policy-specific variations. Always verify with your HR policy and appointment terms.

Eligibility Basics

• In most resignation/retirement cases, gratuity is generally payable after 5 years of continuous service.
• For death or disablement, the 5-year condition may not apply.
• Certain breaks may still count depending on service continuity rules.

How to Use This Calculator

1. Enter your last drawn monthly Basic + DA.
2. Enter completed years and extra months of service.
3. Select whether you are covered under the Gratuity Act.
4. Click Calculate Gratuity.

The result shows your estimated gratuity, service years considered, formula used, and whether a ceiling has been applied.

Example Calculation

Suppose your last drawn Basic + DA is ₹60,000 and your service period is 8 years and 8 months (covered employee).

• Service years counted = 9 (because 8 months > 6)
• Gratuity = 60,000 × 15 × 9 ÷ 26
• Estimated gratuity = ₹3,11,538.46

Tax Treatment (General Guidance)

Taxability of gratuity depends on employee category and applicable tax rules. In many private sector cases, exemption is available up to prescribed limits subject to conditions. Tax laws may change over time, so check the latest Income Tax provisions or consult a qualified tax professional.

Important Notes

• This calculator gives an estimate, not a legal determination.
• Actual gratuity payout may vary due to company policy, legal interpretation, service records, and salary components considered.
• For exact settlement value, rely on your employer’s final computation and official documentation.