Gratuity Calculator

How to use the gratuity calculator

Enter your last drawn monthly basic salary plus dearness allowance, your total years and months of continuous service with the employer, and whether the employer is covered by the Payment of Gratuity Act (most organisations with 10 or more employees are). Choose your employee type: permanent private or PSU staff, fixed-term employees, or government employees. The calculator shows your gratuity, whether you are eligible, how your service is rounded, and how much of the payout is tax-free.

Gratuity formula

For employers covered by the Act (now part of the Code on Social Security, 2020):

15 represents 15 days' wages per year of service, and 26 is the number of working days in a month. Any part of a year more than six months counts as a full year, so 10 years 7 months becomes 11 years, but 10 years 6 months stays at 10. Gratuity payable under the Act is capped at ₹20 lakh.

For employers not covered by the Act, gratuity is voluntary or contractual. For tax purposes it is calculated as:

Only completed years count here; months are ignored.

Worked example

Your last basic + DA is ₹50,000 a month and you have worked 10 years 7 months for a covered employer. Service rounds up to 11 years, so gratuity = 50,000 × 15 ÷ 26 × 11 = ₹3,17,308. All of it is tax-free because it is below both the formula amount and ₹20 lakh. If the same employer were not covered by the Act, the tax formula gives 50,000 × 15 ÷ 30 × 10 = ₹2,50,000.

Eligibility rules

• Permanent employees need at least 5 years of continuous service. Several high courts have held that 4 years plus 240 days worked in the fifth year (roughly 4 years 8 months) qualifies; this calculator treats 4 years 8 months as eligible.
• Fixed-term employees are entitled to pro-rata gratuity after just 1 year, under the Code on Social Security, 2020, which came into force on 21 November 2025.
• The five-year condition does not apply on death or disablement; gratuity is then paid to the employee or nominee.
• Under the labour codes, "wages" must be at least 50% of total remuneration. If allowances exceed half your pay, the excess is added back to wages, which can increase gratuity.

Tax on gratuity

The ₹20 lakh limit is a lifetime limit across all employers. These rules were in Section 10(10) of the Income-tax Act 1961 and continue under the Income-tax Act 2025 from 1 April 2026. Any excess is taxed as salary at your slab rate; you can claim relief under the arrears provisions (formerly Section 89) if it pushes you into a higher slab. The exemption applies under both the old and new regimes.

Results are estimates based on the information entered. Your employer's policy, court rulings and your appointment terms may affect the final amount; this is not legal or tax advice.