Gratuity Calculator

When this applies

• You are leaving a job and want to check the gratuity you are owed.
• You are an employer estimating the gratuity liability on a settlement.
• You want to see how much of the gratuity is above the exempt limit.
• You are planning for retirement and estimating the lump sum.

INR 50,000 monthly salary, 10 completed years

1. 1Last drawn monthly salary: INR 50,000. Completed years: 10.
2. 2Gratuity = 50,000 x 15 / 26 x 10.
3. 315 / 26 = 0.576923. 50,000 x 0.576923 = INR 28,846.
4. 428,846 x 10 = about INR 2,88,462.
5. 5This is below the exempt cap of INR 20,00,000, so none of it is taxable.

Gratuity of about INR 2,88,462, all of it within the exempt limit.

What this calculator does

Estimate the gratuity payable on leaving a job using the formula under the Payment of Gratuity Act, and see how much of it sits above the statutory exempt limit.

How this is calculated

For an employee covered by the Payment of Gratuity Act, gratuity is the last drawn monthly salary - basic plus dearness allowance - multiplied by 15/26 and then by the completed years of service. The 15/26 factor reflects fifteen days of salary for each completed year, with a month treated as twenty-six working days. Gratuity up to the statutory exempt limit is not taxed; the amount above it is taxable.

The formula

Gratuity = last drawn salary × 15/26 × completed years

Common mistakes to avoid

• Using the full salary instead of basic plus DA

  Gratuity is computed on basic plus dearness allowance, not on the gross salary including allowances. Using gross overstates it.

• Counting part years as full years

  The formula uses completed years, with a specific rounding rule for the final part year. Counting every part year as full overstates the gratuity.

• Assuming the whole amount is tax-free

  Only the amount up to the exempt limit is exempt. A large gratuity can have a taxable excess.

Frequently asked

What is the gratuity formula?

Last drawn monthly salary (basic plus dearness allowance) x 15 / 26 x completed years of service, for an employee covered by the Payment of Gratuity Act.

Why is the factor 15/26?

Fifteen days of salary are payable for each completed year, and a month is treated as twenty-six working days, so one day's salary is the monthly salary divided by twenty-six.

How are part years treated?

Under the Act a period beyond six months in the final year is generally rounded up to a full year. This calculator uses completed years, so adjust for the rounding where it applies.

How much gratuity is tax-free?

Gratuity up to the statutory exempt limit is exempt for an employee covered by the Act; the amount above the limit is taxable. The limit is set by law and can change.

Is gratuity payable on resignation?

Gratuity is generally payable on resignation once the qualifying period of continuous service is met. Check your eligibility against the Act.