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Gratuity Calculator

Enter the last drawn basic pay plus dearness allowance and how long the employee has been with you. The amount appears as you type, along with the sum it came from.

Work Out the Amount

Basic pay and dearness allowance only. HRA, bonus, overtime and other allowances are left out.

Completed years. A part year of more than six months counts as a full one, so 7 years and 8 months is 8 years, and 7 years and 4 months is 7.

What is Gratuity?

Gratuity is a lump sum an employer pays an employee for staying with the company. It is not a bonus and it is not discretionary. Once someone has put in five years of continuous service, the Payment of Gratuity Act, 1972 makes it money they are owed.

It is paid when the employee leaves: on resignation, on retirement, on the job ending, or to the family if the employee dies or is disabled while in service. The amount is worked out from the last drawn basic pay plus dearness allowance and the number of completed years.

For the employee it is usually the largest single cheque they get on the way out. For the employer it is a liability that builds up quietly from the day someone joins, at roughly 4.81% of basic pay a month, and lands in full the day they leave.

Eligibility

Who Is Eligible for Gratuity?

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The rules are short. Five years of continuous service with the same employer, at an establishment the Act covers, and a reason for leaving that the Act recognises.

Five years of service

Five years of continuous service with the same employer. A break in service resets it, and years at a previous employer do not carry over.

An establishment with 10 or more staff

The Act applies to any factory, mine, plantation, port, shop or establishment that has had 10 or more employees on any day in the preceding 12 months. Once it applies, it keeps applying even if headcount later drops.

A reason the Act recognises

Resignation, retirement, superannuation, the job ending, or death or disablement while in service. All of them qualify.

Death or disablement, with no five year wait

If an employee dies or is disabled in service, gratuity is paid for the years completed however few they are. It goes to the nominee on Form F, or to the legal heirs where there is none.

Four years and 240 days, in some courts

Several High Courts have held that four years plus 240 days in the fifth year counts as five. It is not settled law everywhere, so check what applies in your state before you rely on it.

When it can be withheld

Gratuity can be forfeited in part or in full where the employee was dismissed for damage to company property, for violence, or for an offence involving moral turpitude committed at work. Nothing else.

The formula

How to Calculate Gratuity

There is one formula with two versions of it. Which one you use depends on whether the Payment of Gratuity Act covers the establishment. Everything else is the same.

Covered by the Act

Gratuity = Last drawn (basic + DA) × Completed years × 15 ÷ 26

The Act treats a month as 26 working days, because it takes out the four Sundays. Fewer days in the divisor means a slightly larger daily rate, so this version pays more.

Someone on ₹1,00,000 basic plus DA who has completed 7 years

₹1,00,000 × 7 × 15 ÷ 26 ₹4,03,846.15

Outside the Act

Gratuity = Last drawn (basic + DA) × Completed years × 15 ÷ 30

Where the Act does not apply, the convention is half a month of pay for each completed year, so the month is a plain 30 days. The employer can always pay more, and many do.

The same person, at an establishment the Act does not cover

₹1,00,000 × 7 × 15 ÷ 30 ₹3,50,000.00

Rounding the service

Only completed years count, and a part year is rounded to the nearest one. More than six months rounds up, six months or fewer is dropped. So 7 years and 4 months is counted as 7 years, and 7 years and 8 months is counted as 8.

The ₹20,00,000 ceiling

Whatever the formula gives, the Act caps what an employer has to pay at ₹20,00,000 over a working life. Employers can pay above it if they want to. The excess is taxable in the employee's hands.

Ready reckoner

Gratuity at Common Salaries and Lengths of Service

Every figure below is 15 days of pay for each completed year, divided by 26, for an employee the Act covers. Round numbers to sanity-check a payslip against.

Gratuity payable by monthly basic pay plus DA and completed years of service
Completed years ₹20,000 ₹30,000 ₹50,000 ₹75,000 ₹1,00,000
5 years ₹57,692 ₹86,538 ₹1,44,231 ₹2,16,346 ₹2,88,462
7 years ₹80,769 ₹1,21,154 ₹2,01,923 ₹3,02,885 ₹4,03,846
10 years ₹1,15,385 ₹1,73,077 ₹2,88,462 ₹4,32,692 ₹5,76,923
15 years ₹1,73,077 ₹2,59,615 ₹4,32,692 ₹6,49,038 ₹8,65,385
20 years ₹2,30,769 ₹3,46,154 ₹5,76,923 ₹8,65,385 ₹11,53,846
25 years ₹2,88,462 ₹4,32,692 ₹7,21,154 ₹10,81,731 ₹14,42,308
30 years ₹3,46,154 ₹5,19,231 ₹8,65,385 ₹12,98,077 ₹17,30,769

At 15 ÷ 26 the ceiling of ₹20,00,000 is first reached at about ₹1,15,600 of basic plus DA over 30 years, or ₹1,73,400 over 20 years. Above those points the employer owes ₹20,00,000 and no more.

Tax

Is Gratuity Taxable?

Gratuity is salary income, so it is taxable in principle. Section 10(10) of the Income Tax Act then exempts most of it, and how much depends on who the employer is.

Government employees

Fully exempt. Central, state and local authority employees pay no tax on gratuity, whatever the amount.

Private sector, covered by the Act

Exempt up to the lowest of three figures: the gratuity actually received, last drawn salary × years × 15 ÷ 26, or ₹20,00,000. Anything above the lowest of those is taxed at the employee's slab rate.

Private sector, outside the Act

Same three-way test, with the middle figure worked out as half a month of average salary for the last 10 months, for each completed year. The ₹20,00,000 limit is the same.

The ₹20,00,000 limit is a lifetime one. If someone has already taken exempt gratuity from an earlier employer, only the balance is exempt this time.

How to use it

How to Use This Gratuity Calculator

Three fields and no sign-up. Nothing you type leaves your browser.

  1. 01

    Say whether the Act applies

    Pick "covered by the Act" if the company has had 10 or more employees on any day in the last year. That is most companies.

  2. 02

    Enter the last drawn basic pay plus DA

    The final month's basic and dearness allowance, not the CTC and not the take-home. Leave out HRA, bonus, overtime and every other allowance.

  3. 03

    Enter the years of service

    Count completed years from the date of joining to the last working day. A part year over six months counts as a full one, so round it up before you type it.

  4. 04

    Read the amount and the working

    The figure updates as you type, and the sum behind it is printed underneath so you can check it against your payroll records.

Why it matters

Where Gratuity Usually Goes Wrong

The formula is easy. What catches HR teams out is the data going into it and the deadline coming out of it.

  • The wrong salary figure

    Gratuity runs on basic plus DA, not on gross and not on CTC. Using gross pay overstates the amount by a wide margin and the error is only ever spotted after the money has gone out.

  • The joining date nobody agrees on

    Offer date, joining date and the date payroll started paying are often three different days. Only one of them is the date of joining, and a few weeks either side can move the rounding by a whole year.

  • The 30 day deadline

    Gratuity is due within 30 days of becoming payable. Miss it and simple interest runs on the amount from the due date until it is paid, at the rate the government notifies.

  • A liability nobody has counted

    Roughly 4.81% of every basic salary is building up as a future payment. Companies that only work it out when someone resigns get a surprise on the day a long-serving team member leaves.

  • Nomination forms that were never filled

    Form F should be on file for every employee who has completed a year. When it is missing and an employee dies, the payment goes to the legal heirs and the family waits while that is settled.

  • Contract staff counted as headcount

    Fixed-term employees earn gratuity on a pro-rata basis under the Social Security Code with no five year wait. Teams that still treat them as outside the scheme underprovide for them.

Gratuity Questions HR Teams Ask

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Gratuity = last drawn basic pay plus dearness allowance, multiplied by the number of completed years, multiplied by 15, divided by 26. The 26 becomes 30 for an employee whose establishment is not covered by the Payment of Gratuity Act, 1972.

Five years of continuous service with the same employer. The only exception is death or disablement in service, where gratuity is paid for whatever service was completed, however short.

Basic pay plus dearness allowance from the last month worked. HRA, conveyance, bonus, overtime, incentives and every other allowance are left out, and so is the CTC figure on the offer letter. Using gross pay is the most common mistake in a manual calculation.

It is rounded to the nearest full year. More than six months rounds up, six months or fewer is dropped. Six years and seven months counts as seven years. Six years and five months counts as six.

Yes. The Payment of Gratuity Act caps what an employer is required to pay at ₹20,00,000 across a working life. An employer can pay more if it chooses, and the excess is taxable in the employee's hands.

For government employees it is fully exempt. For everyone else it is exempt up to the lowest of three figures: what was actually received, the amount the formula gives, and ₹20,00,000. Whatever is above that lowest figure is taxed at the employee's slab rate.

No. Resignation is a valid reason to be paid gratuity, but the five years of continuous service still have to be there first. Some High Courts have accepted four years plus 240 days in the fifth year as five years, so it is worth checking what applies in your state.

Within 30 days of the day it becomes payable, which is normally the last working day. After that the employer owes simple interest on the amount from the due date until it is paid, at the rate the government notifies.

Only in narrow cases. It can be forfeited in part or in full where the employee was dismissed for damage to company property, for riotous or violent conduct, or for an offence involving moral turpitude committed during employment. Poor performance and an abrupt exit are not reasons to withhold it.

About 4.81% of basic pay. That is 15 divided by 26 divided by 12, which is the rate at which the liability builds up. Booking it monthly is what stops a long-serving employee's exit from landing as an unbudgeted cost.

No. The whole calculation runs in your browser. Nothing is sent to a server, nothing is saved, and there is no sign-up.

No. It follows the Payment of Gratuity Act, 1972, which is Indian law. End-of-service benefits in the UAE, Saudi Arabia and elsewhere use different formulas and different service bands.

Let Payroll Do This for You

Niyuk keeps the joining date, the basic pay and the last working day in one record, so gratuity is worked out from the same numbers your payroll already runs on. No spreadsheet, and no rounding argument on the last day.

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