Gratuity is a lump sum an employer pays when you leave a job after a long period of service. It is a thank-you for your years with the company, and it is separate from your final salary and your provident fund.
The gratuity calculator estimates the amount using the standard formula. Rules change, so check the current position with your employer or the labour authorities before you rely on any figure.
The formula
For an employer covered by the Payment of Gratuity Act:
Gratuity = last drawn salary x 15 / 26 x years of service
- Last drawn salary means basic plus DA for the last month, not your total pay.
- The 26 stands for the working days in a month.
- The 15 stands for the days of pay you earn for each year of service.
If your employer is not covered by the Act, a related formula uses 30 days a month instead of 26, so the multiplier is 15 / 30.
How years are counted
Service is counted in full years. If you have more than 6 months beyond a full year, it is usually rounded up to the next year. For example, 10 years and 8 months counts as 11 years. In the calculator, enter the years and the extra months, and the tool applies this rounding.
When it is payable
You usually need at least 5 years of service with the same employer. Exceptions, such as death or disability, may apply. Check your employer’s policy and the current rules.
A worked example
Last drawn basic plus DA is Rs 50,000 a month, with 10 years of service and an employer covered by the Act.
- 50,000 x 15 / 26 = Rs 28,846.15 for each year.
- 28,846.15 x 10 = about Rs 2,88,462.
So the estimated gratuity is about Rs 2,88,462.
If the same person had 10 years and 8 months, the service would count as 11 years and the gratuity would be about Rs 3,17,308.
The tax-free limit
The calculator shows a tax-free limit of Rs 20,00,000 for gratuity. Any amount above the limit may be taxable. Limits and exemptions can change, so confirm them before you plan around them.
Steps
- Open the gratuity calculator.
- Enter your last drawn basic plus DA per month.
- Enter your years of service and any extra months.
- Choose whether your employer is covered by the Payment of Gratuity Act.
- Read the estimated gratuity and the years counted.
The result is an estimate. Your employer’s payroll team gives the final figure.