Gratuity Calculator

Gratuity is a lump-sum reward paid by an employer for long service, governed by the Payment of Gratuity Act, 1972. It applies to establishments with 10 or more employees. You become eligible after completing 5 continuous years of service, payable on resignation, retirement, or superannuation. The 5-year rule is waived in case of death or disablement.

For employees covered under the Act, gratuity = (15 / 26) × last drawn monthly salary × number of completed years of service. The 15/26 reflects 15 days of wages for each year, treating a month as 26 working days. Last drawn salary means basic salary plus dearness allowance. A service period over 6 months in the final year is rounded up to a full year.

Yes. The maximum gratuity payable under the Act is capped at ₹20 lakh. Any amount calculated above this ceiling is not payable as statutory gratuity (though an employer may pay more on an ex-gratia basis). This calculator applies the ₹20 lakh cap automatically.

For private-sector employees covered under the Act, gratuity is tax-exempt up to the least of ₹20 lakh, the actual gratuity received, or the amount computed by the 15/26 formula. Government employees enjoy full exemption. Any gratuity above the exempt limit is taxed as salary income.

Only fully completed years count, with one rounding rule: if you serve more than 6 months beyond a completed year, it rounds up to the next full year; 6 months or less is ignored. For example, 10 years and 7 months counts as 11 years, while 10 years and 4 months counts as 10 years.

Normally no — 5 years of continuous service is the minimum to qualify. The one major exception is death or disablement due to accident or illness, where gratuity is paid regardless of how long the employee served. Courts have also held that 4 years and 240 days in the fifth year can count as 5 completed years, so being just short of a full year may still make you eligible.

For employees whose establishment is outside the Payment of Gratuity Act, the formula is (15 / 30) × average last 10 months’ salary × completed years of service — using 30 days a month and treating only full completed years, with no rounding up for part-years. Covered employees use the more favourable 15/26 basis instead. In both cases salary means basic plus dearness allowance.

On death, the 5-year minimum service condition is waived and gratuity is paid to the nominee or legal heir based on the years actually served. Many employer-run schemes also offer enhanced gratuity on death covering the years that would have been served up to retirement. Gratuity received by the nominee or heirs on the employee’s death is exempt from income tax.

The employer must pay gratuity within 30 days of it becoming due — typically from the date of resignation, retirement, or death. If payment is delayed beyond 30 days, the employer is liable to pay simple interest on the amount. An employer can forfeit gratuity only in limited cases, such as termination for proven misconduct involving moral turpitude or damage to company property.