About the Gratuity Calculator
This gratuity calculator estimates the gratuity payable to an employee covered by the Payment of Gratuity Act, 1972. Enter the last drawn monthly salary, meaning basic pay plus dearness allowance, the completed years of service and any extra months, and the tool shows the gratuity amount, the tax-exempt portion and the taxable portion.
It is useful for employees planning a resignation or retirement, for HR and payroll teams preparing a full and final settlement, and for employers estimating their gratuity liability. Small businesses, which often run payroll without specialised software, can use it to check the figure before it goes into a settlement statement.
The amount is driven by salary and length of service. Gratuity is 15 days' wages for each year of service, with a month taken as 26 working days, and a final part-year of six months or more counts as a full year. The tool treats five completed years as the threshold and applies a tax-exempt limit of ₹20,00,000.
How to use it
- 1Enter the last drawn monthly salary, that is, basic pay plus dearness allowance.
- 2Enter the completed years of service.
- 3Enter the extra months beyond the completed years, from 0 to 11.
- 4Read the gratuity payable, the tax-exempt amount and the taxable portion, and check the eligibility note.
How this is calculated
Gratuity = last drawn monthly salary (basic + DA) × 15 ÷ 26 × years of service. Years of service = completed years, plus one more year if the extra months are six or more. No gratuity is shown if completed years are fewer than five. Tax-exempt amount = lower of the gratuity and ₹20,00,000. Taxable portion = gratuity − tax-exempt amount.
Frequently asked questions
How is gratuity calculated?
For employees covered by the Payment of Gratuity Act, the formula is last drawn salary × 15 ÷ 26 × years of service. With a salary of ₹50,000 and service of 7 years and 4 months, the years count as 7, so gratuity is ₹50,000 × 15 ÷ 26 × 7, or about ₹2,01,923.
Who is eligible for gratuity?
Gratuity generally becomes payable after at least five years of continuous service, except in cases of death or disablement. This gratuity calculator treats five completed years as the threshold and shows zero below it. Some court rulings have taken a more liberal view of the fifth year, so seek advice if you are close to the limit.
How are the extra months of service treated?
A final part-year of six months or more is rounded up to a full year, while anything shorter is ignored. Service of 7 years and 6 months therefore counts as 8 years, and 7 years and 5 months counts as 7. The note below the result shows the number of years the tool has used.
Which salary components count for gratuity?
The calculation uses the last drawn basic pay plus dearness allowance. House rent allowance, bonus, overtime, commission and other allowances are generally excluded. Enter the monthly figure for basic plus DA only; entering your gross salary or your CTC will overstate the result considerably.
Is gratuity taxable?
For employees covered by the Act, the exemption is the least of the gratuity actually received, the amount given by the formula and the limit, which this tool takes as ₹20,00,000 over a lifetime. Anything above that is shown as taxable. Such limits are revised from time to time, and government employees are governed by different rules.
Does this gratuity calculator work for employees not covered by the Act?
No. It follows the formula for establishments covered by the Payment of Gratuity Act, 1972. Employers outside the Act and government employees follow different rules. The Code on Social Security, 2020 also consolidates the law on gratuity and changes some conditions, such as those for fixed-term employees, so check the current position with a professional.