Stax

Gratuity Calculator

Calculate gratuity as per Payment of Gratuity Act 1972.

₹

Basic salary + Dearness Allowance only

Understanding gratuity in India

Gratuity is one of the key retirement benefits for Indian employees. It is paid when an employee leaves after completing the minimum service period — whether due to resignation, retirement, death, or disablement. The Payment of Gratuity Act, 1972 covers all establishments with 10 or more employees.

Key things to know

  • Only Basic + DA counts — HRA, special allowance, and other components are excluded from the gratuity calculation base.
  • 6-month rounding rule — if you have worked 6 or more months in the last year of service, that year counts as a full year.
  • Employer must pay within 30 days — delayed payment attracts simple interest at the rate specified by the government.
  • Nominee in case of death — gratuity is payable to the nominee or legal heir even if the minimum service period is not completed.

Frequently asked questions

What is gratuity?
Gratuity is a lump-sum payment made by an employer to an employee as a token of appreciation for the services rendered over a period of time. In India, it is governed by the Payment of Gratuity Act, 1972.
What is the formula for gratuity?
Gratuity = (Last drawn Basic + DA × 15 × Years of service) ÷ 26. The number 26 represents working days in a month and 15 represents half a month's salary per year of service.
What is the minimum service required for gratuity?
An employee must have completed at least 4 years and 240 days (approximately 4 years 8 months) of continuous service to be eligible for gratuity. If the employee has completed 6 months or more in the final year, it is rounded up to the next full year.
What is the maximum gratuity amount?
The maximum gratuity payable under the Payment of Gratuity Act is ₹20,00,000 (₹20 lakhs). Any amount up to this limit is fully exempt from income tax. Amounts above ₹20L may be paid voluntarily but become taxable.
Is gratuity taxable?
For government employees, the entire gratuity amount is tax-exempt. For private sector employees covered under the Gratuity Act, gratuity up to ₹20,00,000 is tax-free. For employees not covered by the Act, the exemption is the least of actual gratuity, ₹20L, or half month's average salary × completed years.

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