Gratuity Calculator – Calculate Gratuity Online (India)
Gratuity is a key financial benefit earned for long-term service. Use our Gratuity Calculator to instantly estimate the gratuity payable at the time of resignation, retirement, or termination under the Payment of Gratuity Act, 1972.
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Gratuity Calculator — Payment of Gratuity Act 1972
Estimate gratuity payable on retirement/resignation/termination. This is an estimate — employer policy and legal nuances apply.
What Is Gratuity? – Meaning & Importance
Gratuity is a lump-sum amount paid by an employer to an employee to acknowledge continuous and long-term service. It is governed by the Payment of Gratuity Act, 1972, making it one of the most important retirement or exit benefits for salaried individuals in India. This amount helps employees build financial security when they leave an organization or retire from active service.
Gratuity becomes payable only after completing a minimum service period, and the amount depends primarily on the employee’s Basic Salary + DA and the number of completed years in service. Our online Gratuity Calculator helps you compute this amount effortlessly using the official Act-based formula.
Eligibility for Gratuity in India
You are generally eligible to receive gratuity when the following conditions are met:
1. Minimum service requirement
- An employee must complete 5 years of continuous service with the same employer.
- In case of death or permanent disability, the 5-year rule does not apply.
2. When gratuity becomes payable
Gratuity is payable when an employee:
- Resigns
- Retires or reaches superannuation
- Is terminated (unless due to misconduct)
- Dies or becomes permanently disabled
3. Applicability of the Act
The Payment of Gratuity Act applies to:
- Private companies
- Factories and manufacturing units
- Shops and commercial establishments
- Hospitals, schools, NGOs
- Any organization employing 10 or more employees in the preceding 12 months
Employees of organizations not covered under the Act may still receive gratuity through company policy, but the calculation formula differs.
How Gratuity is Calculated
For establishments covered under the Payment of Gratuity Act, the formula is:
Gratuity = (15 ÷ 26) × Last Drawn Salary × Completed Years of Service
Where:
- 15 = 15 days of salary for each completed year
- 26 = number of working days per month (as per the Act)
- Last Drawn Salary = Basic Salary + Dearness Allowance
- If total service exceeds 6 months, it is rounded up to the next full year
Example
If your last drawn Basic + DA is ₹50,000 and your service is 5 years 7 months:
- Rounded service = 6 years
- Gratuity = (15/26 × 50,000 × 6)
- Estimated Gratuity = ₹1,73,077
Our Gratuity Calculator applies this exact rule automatically.
Gratuity Calculation for Employees NOT Covered Under the Act
If an employer is not covered under the Payment of Gratuity Act, the formula changes:
Gratuity = (15 ÷ 30) × Average Salary × Completed Years
Where:
- Average salary = Basic + DA of the last 10 months
- Only completed years are counted (no rounding for months)
Tax Treatment of Gratuity (Updated for AY 2025–26 & AY 2026–27)
1. Government Employees
- Gratuity received is 100% tax-free.
2. Private Sector Employees Covered Under the Gratuity Act
Tax exemption = Least of:
- Actual gratuity received
- ₹20,00,000 (maximum limit under Income Tax Act)
- Gratuity amount calculated using the official formula
Excess gratuity is taxable under Income from Salary.
3. Employees Not Covered Under the Gratuity Act
Tax exemption = Least of:
- Actual gratuity received
- ₹20,00,000
- Half month’s average salary × number of completed years
Note:
If gratuity is received from multiple employers in different years, the total lifetime exemption remains capped at ₹20 lakh.
How to Use Our Gratuity Calculator
Using this calculator is simple and takes less than 10 seconds:
- Enter your last drawn monthly Basic + DA.
- Enter your date of joining.
- Enter your date of leaving or retirement.
- Select whether you are covered under the Payment of Gratuity Act.
- Click Compute Gratuity.
The tool will automatically calculate:
- Completed years of service
- Years eligible for gratuity
- Gratuity calculation using the correct formula
- Estimated gratuity payable
- Explanation of the computation
This helps you plan your finances, retirement, and exit benefits efficiently.
Why Use a Gratuity Calculator?
- Avoids manual calculation errors
- Applies official rounding rules
- Helps understand eligible years instantly
- Supports resignation, retirement, and job-change planning
- Useful for tax planning
- Provides a clear breakdown of how the payout is computed
Frequently Asked Questions (FAQ)
1. Is 5 years mandatory for gratuity?
Yes, except in cases of death or permanent disability.
2. What salary is considered for gratuity?
Only Basic Salary + DA, not gross or CTC.
3. Can an employer refuse to pay gratuity?
No. Once eligible, gratuity is a legal right and cannot be withheld.
4. Is gratuity taxable?
Up to ₹20 lakh is tax-exempt for eligible private-sector employees.
5. Does maternity leave count as service?
Yes. Paid leave, maternity leave, and sick leave count as continuous service.
6. Do I get gratuity if I resign?
Yes, if you complete 5 years of service.
7. Is gratuity part of CTC?
Some companies show an indicative gratuity amount in CTC, but actual payment depends on service completion.