Gratuity Calculator
Calculate the gratuity payable when you leave a job. Enter your last drawn basic salary and years of service to see your gratuity and its tax-free portion.
Gratuity is calculated only on basic salary plus dearness allowance, not on the full CTC.
You become eligible for gratuity after completing 5 years of continuous service.
Gratuity Amount
₹2.88 L
Tax-Free Portion
₹2.88 L
Up to Rs 20 lakh exempt
Taxable Portion
₹0
Formula
Gratuity = Last drawn salary x 15 / 26 x Years of service. The 15/26 factor represents 15 days of salary for each completed year, based on a 26-day working month.
For private sector employees, gratuity up to Rs 20 lakh is tax-free; the excess is taxable. The Rs 20 lakh limit is a lifetime ceiling across all employers. Service of more than 6 months in the final year is rounded up to a full year.
What is gratuity?
Gratuity is a lump-sum payment your employer makes to you when you leave a job, retire or pass away, as a recognition of long service. It is governed by the Payment of Gratuity Act, 1972 and applies to employees who have completed at least 5 years of continuous service in an organisation. Gratuity is calculated as 15 days of last-drawn salary for every completed year of service. The calculator handles both "Act-covered" and "Not-covered" employees and shows the tax-free portion and any taxable balance.
How to use the Gratuity Calculator
- Enter your last-drawn monthly basic + DA. Gratuity is calculated on basic plus dearness allowance.
- Enter completed years of service. Minimum 5 years for eligibility. 6 months or more counts as a year.
- Choose Act-covered or not-covered. Most private sector employees are Act-covered.
- Review the gratuity amount. See the calculated gratuity and the tax-free limit.
- Check tax treatment. ₹20 lakh lifetime tax-free limit for private sector employees (Act-covered).
Formula and method
The Act-covered formula uses a 26-day month (assuming Sundays as paid leave). The not-covered formula uses an average of the last 10 months' basic. Lifetime tax-free limit is ₹20 lakh for both, in the private sector.
Things to know about gratuity
- 5-year rule. You need 5 years of continuous service for the gratuity to vest, except in case of death or disability.
- Counts toward retirement corpus. Often a meaningful lump sum at the end of a long career.
- Tax-free up to ₹20 lakh lifetime. Any excess is taxed at slab.
- One year = 240 days. Six months counted as full year for gratuity.
- Employer pays from a separate gratuity fund. Not from your salary.