Gratuity Calculator
The Gratuity Calculator estimates the gratuity payable to an employee under the Payment of Gratuity Act, 1972. Gratuity is a lump-sum payment made by an employer to an employee who has completed at least 5 years of continuous service.
Gratuity Calculator
Currency
$
$
years
What the result means
Gratuity is calculated as (Last drawn salary × 15 × Years of service) ÷ 26. The factor 15 represents 15 days of salary for each completed year of service, and 26 is the number of working days in a month. The amount is capped at ₹20 lakh.
How to use this calculator
- 1Enter your last drawn basic salary in rupees.
- 2Enter your dearness allowance (DA) in rupees.
- 3Enter your total years of service.
- 4Press Calculate to see the estimated gratuity amount.
- 5Note that gratuity is capped at ₹20 lakh for most employees.
The formula
The calculation uses a standard, verifiable formula. Here it is in its simplest form.
Gratuity = (Last drawn salary × 15 × Years of service) ÷ 26
Capped at ₹20,00,000
What each variable means
| Symbol | Name | Description |
|---|---|---|
| S | Last drawn salary | Basic salary plus dearness allowance at the time of leaving. |
| Y | Years of service | The number of completed years of continuous service. |
Step-by-step example
Example: ₹35,000 salary (basic + DA) for 10 years
Basic salary:₹30,000Dearness allowance:₹5,000Years of service:10
- 1Salary = 30,000 + 5,000 = ₹35,000
- 2Gratuity = (35,000 × 15 × 10) ÷ 26
- 3= 5,25,000 ÷ 26
- 4= ₹2,01,923
Result
≈ ₹2,01,923
What changes the result
- Gratuity is tax-free up to ₹20 lakh.
- The 5-year minimum service requirement is waived in case of death or disability.
- The formula uses 26 working days per month, not 30.
- Gratuity is paid on resignation, retirement, or termination after 5 years.
Edge cases to be aware of
Unusual situations handled correctly
- If service is less than 5 years, gratuity is generally not payable (except on death/disability).
- The amount is capped at ₹20 lakh.
- Years of service are rounded to the nearest full year for the calculation.
Common mistakes
Avoid these errors
- Using 30 days instead of 26 in the formula.
- Forgetting to include dearness allowance in the salary.
- Assuming gratuity is payable before 5 years of service.
Assumptions
- The employee has completed at least 5 years of continuous service.
- The salary is the last drawn basic plus DA.
- The Payment of Gratuity Act applies to the employer.
Limitations
- Does not account for employer-specific gratuity policies that may be more generous.
- The ₹20 lakh cap may change with amendments.
- This is an estimate; the actual amount depends on your employer's policy.
Frequently asked questions
Is gratuity taxable?+
Gratuity is tax-free up to ₹20 lakh for employees covered under the Payment of Gratuity Act. Any amount above this is taxable.
How many years of service are required for gratuity?+
Generally, 5 years of continuous service is required. However, gratuity is payable even before 5 years in case of death or disability of the employee.
What is the formula for gratuity?+
Gratuity = (Last drawn basic salary + DA) × 15 × Years of service ÷ 26. The 15 represents 15 days of salary per year, and 26 is the working days in a month.