How the Gratuity Calculator Works
Enter your last drawn monthly wages (Basic plus Dearness Allowance), your length of service, and whether your employer is covered by the Payment of Gratuity Act. Choose permanent or fixed-term employment so the calculator can check the minimum service period.
For employees covered by the Act, gratuity is 15 days of wages for every completed year of service, where a month is treated as 26 working days. A part-year of more than six months is counted as a full year. For employees not covered by the Act, a month is treated as 30 days and only completed years count.
The calculator then compares your gratuity with the ₹20 lakh lifetime tax-exemption limit (reduced by any exemption you claimed earlier) and shows the tax-free and taxable portions separately.
Formula Used
For employees covered by the Payment of Gratuity Act, gratuity is calculated as follows. If your employer is not covered by the Act, the divisor changes from 26 to 30 and only completed years count.
Gratuity = Last Drawn Wages × 15 ÷ 26 × Years of Service- Last Drawn WagesMonthly Basic + Dearness Allowance at the time of exit (for employers not covered by the Act, the average of the last 10 months' salary)
- 15Days of wages payable for each year of service
- 26 (or 30)Working days assumed in a month — 26 for employees covered by the Act, 30 for those not covered
- Years of ServiceCompleted years; for covered employees, a part-year of more than 6 months is rounded up
Example Calculation
Suppose your last drawn Basic + DA is ₹50,000 per month, you have completed 10 years of service, and your employer is covered by the Payment of Gratuity Act.
- Last Drawn Wages₹50,000 per month
- Years of Service10 years
- CoverageCovered (15/26)
- ResultGratuity ≈ ₹2,88,462 (fully tax-free)
Important Assumptions
- The result is the statutory formula amount. Your employer may pay more under its own policy, and any amount above the tax-exemption limit is taxable.
- Wages mean Basic plus Dearness Allowance. Under the Code on Social Security, 2020 (in force from 21 November 2025), wages for gratuity must generally be at least 50% of total remuneration, so if your basic pay is a small share of your CTC, your employer's gratuity base may be higher than your basic. Enter the wage figure your employer uses for gratuity.
- Permanent employees are treated as eligible after 5 years of continuous service and fixed-term employees after 1 year. The minimum period does not apply on death or disablement. How part-years count towards the 5 years can vary by case, so confirm with your employer.
- The tax exemption is taken as ₹20 lakh across all employers over your lifetime, which applies to private-sector employees. Government employees are generally treated differently.
- This calculator estimates gratuity only. It does not calculate any income tax on the taxable portion, which depends on your other income and tax regime.
- Rules and limits can change. Check the current notified rules before relying on a result.