Gratuity calculator

Gratuity is a lump-sum benefit that employers pay to employees who leave after long service, as a reward for loyalty. In India it is governed by the Payment of Gratuity Act, 1972, and similar end-of-service benefits exist in many countries, including the Gulf states. This calculator estimates the amount from salary and tenure.

How to use it

1. Enter the last drawn monthly basic salary plus dearness allowance.
2. Enter the years and months of continuous service.
3. Choose whether the employer is covered by the Gratuity Act.
4. Read the gratuity amount and the tax-exempt portion.

The formula (covered employers, India)

Gratuity = (15 × Last drawn salary × Years of service) / 26

The 26 represents working days in a month, and 15 represents 15 days of wages per completed year. Service of more than 6 months in the final year is rounded up to a full year.

Worked example

Last drawn basic plus DA of 60,000 per month and 8 years 7 months of service (rounded to 9 years): 15 × 60,000 × 9 / 26 = 311,538.

Key rules

• Eligibility: generally at least 5 years of continuous service, except on death or disablement.
• Tax exemption: gratuity received by private sector employees is tax-free up to a statutory limit, currently 20,00,000.
• Non-covered employers use 30 instead of 26 and count only completed years.
• Forfeiture is possible in cases of termination for serious misconduct.

Rules change from time to time; confirm with your HR department or a tax adviser before relying on the figure.