Gratuity Calculator
Calculate gratuity payable under the Payment of Gratuity Act.
About the Gratuity Calculator
Gratuity is a lump-sum thank-you an employer owes an employee who has stayed at least five years — a statutory right under the Payment of Gratuity Act, 1972, not a discretionary bonus. It's paid on resignation, retirement, termination (other than for misconduct) or death, and the formula is fixed by law: 15 days' wages for every completed year of service, calculated on your last drawn basic salary plus dearness allowance.
The exact formula is (15 × last drawn monthly salary × years of service) ÷ 26 — the 26 representing working days in a month, so it's really 15/26ths of a month's salary per year served. Service beyond six months in your final year rounds up to a full year: 8 years and 7 months counts as 9 years for this calculation, while 8 years and 4 months counts as 8. The law also caps total gratuity at ₹20 lakh regardless of the formula's output — a limit that mainly bites senior employees with long tenure and high salaries.
Eligibility requires five years of continuous service (this requirement is waived on death or disablement). Below that threshold, no gratuity is payable however good your service was — a rule you should know before resigning just short of your fifth anniversary. Note that gratuity received on retirement is tax-exempt up to ₹20 lakh for private-sector employees; consult a tax advisor for your specific situation.
Frequently asked questions
- Do I need to complete exactly 5 years to get gratuity?
- Yes for resignation or retirement — a minimum of 5 years of continuous service is required. The requirement is waived if employment ends due to death or permanent disablement.
- Why did 8.4 years count as 8, but 8.7 years count as 9?
- The Act rounds the final year up only if you've served more than 6 months into it. Less than or equal to 6 months rounds down to the completed year.
- Is there a maximum gratuity amount?
- Yes — ₹20 lakh under the current statutory ceiling, regardless of what the formula computes for high earners with long service. The calculator applies this cap automatically.
- Is gratuity taxable?
- For private-sector employees covered by the Act, gratuity is tax-exempt up to ₹20 lakh (the same statutory cap). Amounts above that, or for employees not covered by the Act, follow different exemption rules.
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