Gratuity Calculator
Gratuity is a lump-sum reward your employer pays for long service, typically when you resign, retire or are let go after at least five years with the same company. For employees covered by the Payment of Gratuity Act, the amount follows a fixed formula based on your last-drawn basic plus dearness allowance and your completed years of service. This calculator applies that 15/26 formula to your figures and shows the gratuity due, along with how much of it stays tax-free.
Gratuity Payable
₹2,88,462
About the Gratuity Calculator
Gratuity is a statutory benefit under the Payment of Gratuity Act, 1972, payable to employees who complete five or more years of continuous service with an employer. It is meant as a token of appreciation for loyalty and is paid on resignation, retirement, death or disablement.
Why it is useful
Knowing your gratuity helps you plan your finances around a job change or retirement and check that your employer has paid the correct amount. It also tells you how much of the payout is tax-free, so you can provide for any tax on the portion above the ₹20 lakh lifetime ceiling.
How the calculation works
For covered employees, Gratuity = 15 × last-drawn salary × years of service ÷ 26, where salary is basic pay plus dearness allowance and 26 is the number of working days in a month. A period beyond six months in the final year is rounded up to a full year. The amount is tax-free up to ₹20 lakh over your lifetime for private-sector employees, and anything above that is taxable.
Key inputs explained
- Last-drawn salary: Your final monthly basic pay plus dearness allowance, on which the formula is based.
- Years of service: Completed years with the employer; a part-year over six months rounds up to one year.
- Coverage under the Act: Whether your employer employs 10 or more persons and is covered, which fixes the 15/26 formula.
Example calculation
Inputs
- Last-drawn salary (basic + DA)
- ₹50,000
- Years of service
- 10
- Formula
- 15/26
Calculation breakdown
- Gratuity = 15 × salary × years ÷ 26
- 15 × 50,000 × 10 ÷ 26
- Numerator
- 15 × 50,000 × 10 = 75,00,000
- Divide by 26
- 75,00,000 ÷ 26
The formula gives about ₹2,88,462, which is well within the ₹20 lakh tax-free limit, so the employee receives the full amount without any tax.
Benefits
- Know your expected gratuity before resigning or retiring.
- Verify that your employer's payout matches the statutory formula.
- See how much of the amount is tax-free under the ₹20 lakh ceiling.
Limitations
- The 15/26 formula applies only to employees covered by the Payment of Gratuity Act.
- Uses last-drawn basic plus DA; special allowances and bonuses are excluded.
- Does not model gratuity for government employees or those on differing contractual terms.
Tips
- Complete five years of continuous service to become eligible in the first place.
- Remember that a fraction of a year over six months counts as a full year.
- Track your cumulative tax-free gratuity across jobs, since the ₹20 lakh limit is for a lifetime.
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About this calculator
The Gratuity Calculator is built and maintained by the PaisaBot team. All calculations run instantly in your browser using established financial formulas, and we use high-precision arithmetic to keep the results reliable.
Data accuracy: Interest rates, tax slabs, and scheme rules are updated periodically, but figures can change with RBI, government, and lender revisions. Always confirm the latest rates with your bank or an official source before acting.
Educational purpose: This tool is provided for general information and financial education only. It does not constitute investment, tax, or legal advice. For decisions specific to your situation, please consult a qualified financial advisor.