Gratuity Calculator

⚠️ Not financial advice. Results are illustrative only and should not be used as the basis for any investment, tax, or financial decision. Consult a qualified financial adviser or chartered accountant before acting on any figure shown.

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.

Who uses this gratuity calculator

Employees approaching resignation or retirement use it to estimate the lump sum they are entitled to. HR managers use it to provision gratuity liabilities in the company's books and to verify settlement amounts. Finance teams at larger companies calculate the actuarial gratuity liability for accounting disclosures under Ind AS 19. Candidates evaluating job offers use it to understand how gratuity adds to the overall total compensation over time.

Gratuity and income tax planning

Gratuity received by private sector employees is exempt under Section 10(10) of the Income Tax Act up to ₹20 lakh. Any amount above this limit is added to income and taxed at the applicable slab rate. If you expect your gratuity to exceed ₹20 lakh — common for long-serving employees at large companies — plan ahead: the excess becomes taxable in the year of receipt. Government employees enjoy a complete exemption with no upper cap.

Gratuity Act coverage

The Payment of Gratuity Act, 1972 applies to all factories, mines, oilfields, plantations, ports, railways, shops, and establishments employing 10 or more persons. Once an establishment crosses the 10-employee threshold, it remains covered even if headcount later falls below 10. Employees not covered by the Act (smaller companies) may still receive ex-gratia gratuity voluntarily, though the formula and tax treatment differ slightly.

Frequently asked questions

What is gratuity?

Gratuity is a lump-sum payment made by an employer to an employee 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 h 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.