Gratuity Calculator Know Your End-of-Service Payout

What Is Gratuity?

Gratuity is a statutory lump-sum payment made by an employer to an employee in recognition of long and continuous service. Governed by the Payment of Gratuity Act, 1972 (now under the Code on Social Security), it becomes payable on resignation, retirement, superannuation, death, or disablement. The minimum qualifying threshold is five years of continuous service — with the death and disablement exceptions waiving that requirement entirely.

How to Use This Calculator

• Enter your last drawn monthly basic salary plus any Dearness Allowance (DA).
• Set your completed years of service and any additional months in the final year.
• Select whether your employer is covered under the Payment of Gratuity Act.
• Your gratuity, effective years after rounding, and the formula used appear instantly on the right.

Formula: Covered Under the Act

Gratuity = (Last Drawn Salary × 15 × Years of Service) ÷ 26. The divisor 26 represents the average number of working days in a month, excluding Sundays. The '15' stands for 15 days' wages per completed year — roughly half a month's salary for each year served. The statutory maximum for private-sector employees is ₹20 lakh; anything above is classified as ex-gratia and is fully taxable.

Formula: Not Covered Under the Act

Gratuity = (Last Drawn Salary × 15 × Years of Service) ÷ 30. Where an employer is not covered by the Act — typically organisations with fewer than 10 employees — the divisor shifts to 30 calendar days rather than 26 working days. This produces a lower figure, and no statutory rounding rule applies to partial years of service.

The Partial-Year Rounding Rule

Under the Payment of Gratuity Act, if an employee's tenure in the final year exceeds six months, that year is rounded up and counted as a full year. So 7 years and 9 months counts as 8 years; 7 years and 4 months stays at 7. This rounding rule applies only to covered employees — it is reflected in the calculator when you set additional months above 6.

Covered vs Not Covered: Key Differences

Who Is Eligible for Gratuity?

• you have completed at least 5 years of continuous service (for resignation, retirement, or superannuation).
• the 5-year minimum is waived entirely in cases of death or disablement due to accident or disease.
• under the new Labour Code, fixed-term employees qualify for pro-rata gratuity after just 1 year of continuous service.
• the organisation has 10 or more employees (threshold for mandatory coverage under the Act).
• gratuity is also payable on termination, except where dismissal is for proven misconduct in certain circumstances.

Key Gratuity Rules in India

• payable on superannuation, retirement, resignation, death, or disablement after 5 years of continuous service.
• in death or disablement cases, the gratuity goes to the nominee or legal heirs and the 5-year rule does not apply.
• the maximum tax-exempt gratuity is ₹20 lakh for private-sector employees under the Act, and ₹25 lakh for Central Government employees.
• an employee may apply within 30 days of the date gratuity becomes payable; the employer must release it within 30 days of that application.
• gratuity cannot be attached by a court order — it is protected even if the employer goes into bankruptcy or liquidation.

Tax Treatment of Gratuity

Government employees (central, state, or local authority): entirely exempt from income tax, subject to a ₹25 lakh lifetime ceiling. Private-sector employees covered under the Act: exempt up to ₹20 lakh; any amount above is taxed as salary income in the year of receipt. For employees not covered by the Act, a separate partial exemption applies based on half a month's average salary per completed year. Importantly, the lifetime tax-exempt cap is shared across all employers — it does not reset when you change jobs.

Investing Your Gratuity Payout