Gratuity Calculator
Calculate gratuity under the Payment of Gratuity Act — tax exemption up to ₹20 lakh
Service Details
Last Drawn Basic + DA (Monthly ₹)
₹
Years of Service (min. 5 years)
yrs
Gratuity Formula (Payment of Gratuity Act)
Gratuity = (15 / 26) × Last Basic+DA × Years of Service
15 days wages per year of service (26 working days/month)
Tax Exemption: Up to ₹20,00,000 (₹20 lakh) is fully tax-free
Note: Minimum 5 years of continuous service required
Gratuity Amount
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Gratuity Amount
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Tax-Exempt (max ₹20L)
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Taxable Gratuity
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15 Days Wages
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Per year of service
Calculation Breakdown
| Last Basic + DA (Monthly) | — |
| 15/26 × Basic | — |
| Years of Service | — |
| Gratuity = (15/26) × Basic × Years | — |
| Tax Exemption Limit | ₹20,00,000 |
| Tax-Exempt Amount | — |
| Taxable Amount | — |
What is a Gratuity Calculator?
Gratuity is a lump-sum payment made by an employer to an employee as a reward for long service, typically paid at retirement, resignation (after 5+ years), or death/disability. It is governed by the Payment of Gratuity Act, 1972 and applies to organisations with 10+ employees.
The standard formula is: Gratuity = (Last Drawn Basic + DA) × 15/26 × Years of Service. Note that 26 working days per month are considered and 15 days' salary is paid per year. Gratuity up to ₹20 Lakhs is fully tax-exempt for most employees.
lightbulb Example Calculation
Scenario: Mr. Arun Kumar, who served 8 years and 7 months at Wipro — Last drawn Basic + DA = ₹45,000/month, now leaving for a new role at Infosys
1Years of service = 8 years 7 months → rounded to 9 years (any fraction above 6 months rounds up)
2Gratuity = (₹45,000 × 15 × 9) / 26 = ₹60,75,000 / 26 = ₹2,33,654
3This is below ₹20 Lakh threshold → Entire ₹2,33,654 is tax-free
✓ Result: Mr. Arun receives ₹2,33,654 as gratuity from Wipro — fully tax-exempt under Income Tax Act.
help_outlineHow to Use the Gratuity Calculator
- Enter your last drawn Basic Salary + Dearness Allowance (DA) as a monthly amount — this is what's mentioned on your final salary slip.
- Enter your total years of service at the company — minimum 5 years is required for gratuity eligibility. Enter decimals (e.g., 8.7 for 8 years 8 months).
- Click Calculate Gratuity to see your gratuity amount, the tax-exempt portion (up to ₹20 lakh), and any taxable amount above the exemption limit.
Benefits
- Instantly calculates statutory gratuity entitlement under the Payment of Gratuity Act
- Shows tax-exempt portion (up to ₹20 lakh) — key for financial exit planning
- Helps verify whether your employer's gratuity payment is accurate
- Service rounding logic built in — automatically rounds up months above 6
- Useful at the time of resignation, retirement, or job switching
Key Terms
- Payment of Gratuity Act, 1972
- The law mandating gratuity payment for employees with 5+ years of continuous service in establishments employing 10 or more workers.
- Basic + DA
- Dearness Allowance (a cost-of-living adjustment component) is included along with basic salary in the gratuity base calculation. HRA and other allowances are excluded.
- 15/26 Formula
- Gratuity = 15 days' wages per year of service, where a month is assumed to have 26 working days (not 30). This is the statutory formula under the Act.
- ₹20 Lakh Exemption
- Gratuity up to ₹20 lakh is fully tax-exempt for employees under the Payment of Gratuity Act. Government employees enjoy unlimited gratuity tax exemption.
- Service Rounding
- If the last year of service has more than 6 months, it rounds up to a full year. E.g., 8 years 7 months = 9 years; 8 years 5 months = 8 years for gratuity calculation.
quizFrequently Asked Questions
Am I eligible for gratuity if I resign before 5 years?
No — the Act requires minimum 5 years of continuous service. However, some court judgments have ruled that completing 4 years and 240 days (approximately) may qualify. This is based on the interpretation that 240 working days equal a full year. Consult your HR or legal counsel for clarity in specific cases.
How are years of service rounded for gratuity calculation?
Service beyond 6 months in the final year rounds up to a full year. For example: 8 years 7 months counts as 9 years; 8 years 5 months counts as 8 years. The calculation is based on continuous service — breaks in service may affect eligibility depending on the circumstances.
Is gratuity taxable?
For employees covered under the Payment of Gratuity Act, gratuity up to ₹20 lakh is fully tax-exempt. Any gratuity above ₹20 lakh is taxable as salary income and TDS may be deducted. Government employees have unlimited gratuity tax exemption with no ceiling.
Within how many days must an employer pay gratuity?
Gratuity must be paid within 30 days of it becoming payable (resignation, retirement, etc.). Delayed payment attracts simple interest at 10% p.a. from the due date. Willful non-payment is a criminal offence under the Act, with penalties including imprisonment for the employer.
Are allowances like HRA and bonus included in the gratuity base?
No. The Act specifically includes only Basic Salary and Dearness Allowance (DA) in the gratuity base calculation. HRA, travel allowance, special allowance, incentives, and bonus are all excluded from the gratuity formula regardless of their magnitude.
Can I receive gratuity from multiple employers?
Yes. Each employer independently calculates and pays gratuity based on your service period and last drawn salary with that specific employer. If you worked 7 years at Company A and 6 years at Company B, both owe you separate gratuity amounts. The ₹20 lakh tax exemption limit applies individually per employer payment.