What Is a Gratuity Calculator?
A Gratuity Calculator works out the lump-sum amount your employer owes you when you leave a job after years of service — on retirement, resignation, superannuation, or in case of death or disablement. It's built for salaried employees in the private sector, corporate and government employees, HR and payroll teams, and CAs who need to check a Full & Final settlement figure. Enter your last drawn salary and years of service, and it applies the statutory formula directly.
For employees covered under the Act (establishments with 10 or more employees):
Gratuity = (Last Drawn Salary × 15 × Completed Years of Service) ÷ 26
- Last Drawn Salary = Basic Pay + Dearness Allowance (DA) only. Leave out HRA, bonus, and other allowances. Since the Code on Wages now requires Basic + DA to be at least 50% of CTC, this base — and your gratuity — moves with every CTC restructuring.
- 15 = days' wages per completed year, fixed under Section 4(2) of the Act.
- 26 = working days counted in a month under the Act.
- Completed Years of Service: a year where you've worked more than 6 months counts as a full year; under 6 months gets dropped.
The gratuity amount is capped at ₹20,00,000, per Ministry of Labour & Employment notification S.O. 1420(E), dated 29 March 2018.
Employees outside the Act's coverage don't have a statutory formula to fall back on. Employers there often follow a similar practice voluntarily, usually dividing by 30 instead of 26 — but this isn't a legal entitlement the way it is under the Act. This calculator is built for the covered case.
How This Calculator Works
- Enter your last drawn basic salary plus DA in rupees.
- Enter the full years you've completed with your employer.
- Enter any additional months since your last completed year (0–11).
- Click Calculate. The tool rounds your service up to the next full year if you've crossed 6 additional months, applies the ₹20 lakh statutory cap where needed, and shows your gratuity amount right away.
Step-by-Step Example Calculation
Rohan worked at a private company covered under the Act for 7 years and 8 months, with a last drawn basic salary + DA of ₹45,000.
- Round the service period: 8 months is more than 6, so his service rounds up to 8 completed years.
- Apply the formula: Gratuity = (45,000 × 15 × 8) ÷ 26
- Multiply: 45,000 × 15 × 8 = 54,00,000
- Divide: 54,00,000 ÷ 26 = ₹2,07,692 (rounded)
- Check the cap: ₹2,07,692 is well under the ₹20,00,000 ceiling, so this is Rohan's final gratuity amount.
Rohan's gratuity payable = ₹2,07,692
Who Should Use This Gratuity Calculator
This calculator works for anyone estimating a Payment of Gratuity Act payout, including:
- Salaried employees in the private sector planning to resign or estimating retirement benefits.
- Corporate and government employees checking their Full & Final settlement figure before signing off on an offer or exit — pair it with the Salary Increment Calculator if a hike is changing your CTC and Basic + DA split.
- HR and payroll teams computing gratuity liability for exiting staff.
- CAs and finance professionals advising clients on retirement and tax planning.
- Anyone comparing job offers where gratuity forms part of the overall CTC.
Latest Rules You Should Know (2026)
- The statutory gratuity ceiling has stood at ₹20,00,000 since the Payment of Gratuity (Amendment) Act, 2018 took effect on 29 March 2018. That's still the limit for private-sector employees covered under the Act.
- Central Government employees under the CCS (Pension) Rules got a separate ceiling hike to ₹25,00,000 in 2024. That doesn't apply if you're covered under the Payment of Gratuity Act, 1972 — your cap stays at ₹20,00,000.
- Gratuity up to ₹20,00,000 stays tax-exempt under Section 10(10)(ii) of the Income Tax Act. Check your full tax picture with our Salary Tax Calculator India.
Common Mistakes People Make
- Including HRA or bonus in "last drawn salary." Only Basic Pay + DA counts. Adding other components inflates the result.
- Forgetting the 6-month rounding rule. 7 years 5 months stays at 7 years; 7 years 6 months rounds up to 8.
- Treating gratuity as a salary deduction. It's fully employer-funded — nothing comes out of your monthly pay to fund it.
- Applying the divisor 30 instead of 26. The 26-day divisor is specific to employees covered under the Payment of Gratuity Act. Uncovered establishments sometimes use a different, non-statutory formula — don't mix the two.
- Treating 5 years as a rigid calendar cutoff. Section 2A of the Act counts 240 working days in your final year as a completed year of continuous service, even if the calendar total falls just short of five years.
- Ignoring the ₹20 lakh cap. High earners with long tenures often forget the ceiling caps the payable amount regardless of what the formula computes.
FAQs
Is gratuity calculated on basic salary or gross salary?
Gratuity is calculated only on Basic Pay + Dearness Allowance (DA), not gross salary. HRA, bonus, and other allowances are excluded under Section 4 of the Payment of Gratuity Act, 1972.
What is the minimum service period to get gratuity?
You need 5 years of continuous service with the same employer, except in cases of death or disablement, where this minimum doesn't apply. Section 2A of the Act allows 240 working days in the fifth year to count as a completed year.
Is gratuity taxable in India?
Gratuity up to ₹20,00,000 is tax-exempt under Section 10(10)(ii) of the Income Tax Act for employees covered under the Payment of Gratuity Act. Anything above this limit gets taxed at your income tax slab rate.
Why does the formula divide by 26 and not 30?
The Act treats a month as 26 working days, assuming a 6-day work week — not the calendar's 30 or 31 days. That's why "15 days' wages" works out to (salary ÷ 26) × 15.
Does resignation affect gratuity eligibility?
No. Resignation is a valid ground for gratuity under Section 4(1)(b), as long as you've completed at least 5 years of continuous service.
Can my employer deny gratuity?
Only in narrow cases under Section 4(6) — termination for riotous or violent conduct, or a conviction involving moral turpitude. Outside these, gratuity is a legal entitlement, not something your employer can choose to withhold.
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