Gratuity Calculator (India)
Calculate gratuity under the Payment of Gratuity Act, 1972 with the 15/26 formula and the ₹20 lakh tax-exempt cap for Indian employees.
Include dearness allowance if applicable.
A year counts as full when you have served 6+ months beyond the completed year, as per the Payment of Gratuity Act, 1972. Minimum eligibility: 5 years.
Gratuity
₹3,00,000
Service counted
13 years
Full gratuity
Tax status
Tax-free
Up to ₹20L is exempt
Formula: years of service × last drawn salary × 15 ÷ 26. Tax exemption limit is ₹20,00,000 for non-government employees; anything above that is taxable as per your slab.
How it works
Gratuity = last drawn salary × years of service × 15 ÷ 26. Exempt up to ₹20,00,000.
Example: ₹40,000 salary, 13 years → 40000 × 13 × 15 ÷ 26 = ₹3,00,000.
Last updated: July 2026
How this calculator is verified
Checked by True Calculator automated test suite on
- Formula verified against a published worked example in the automated test suite
- Edge cases (zero, negative, boundary and unit-mismatch inputs) covered by unit tests
The full verification method is on our how we verify page. Found an error? Tell us and we will re-check it.
When to Use This Calculator
Use the gratuity calculator when you are leaving a job after five or more years of continuous service, or planning for that day. Gratuity is governed in India by the Payment of Gratuity Act, 1972, and the payout follows a fixed 15/26 formula based on your last drawn basic salary and years of service, with the tax-exempt portion capped at ₹20 lakh. Enter your last basic salary and years of service to get the exact amount, the exempt part and the taxable part. Employees in private companies, banks and PSUs use it during resignation, retirement and even while negotiating a new offer, since the gratuity earned to date is part of the true cost of leaving. Knowing the figure in advance removes the guesswork from exit formalities.
How to Use This Calculator
- Step 1: Enter your last drawn basic pay plus dearness allowance, since gratuity is calculated on these, not on your full salary.
- Step 2: Enter the number of complete years of continuous service with the employer.
- Step 3: Read the gratuity amount, which uses the 15-days-for-each-year formula of 15 times the last drawn pay divided by 26 per year of service.
- Step 4: Check the tax note showing that the amount is exempt up to ₹20 lakh under Section 10(10) of the Income-tax Act.
Worked Example
An employee in Pune leaves a job after 12 years of continuous service with a last drawn basic plus dearness allowance of ₹50,000. Under the Payment of Gratuity Act, 1972, the gratuity is 15 days of pay for each completed year of service, so the calculation is 50000 × 15 × 12 / 26, which equals about ₹3,46,154. Enter 50000 as the last drawn basic plus DA and 12 as the years of service, and the tool shows this amount, noting that it is fully exempt from tax up to the ₹20 lakh ceiling.
Tips and Common Mistakes
- •Tip 1: Gratuity is payable after 5 years of continuous service, so count only complete years and use your basic plus DA, not the full salary.
- •Tip 2: The 15/26 formula treats a month as 26 working days; this divisor is fixed by the Act and applies to every covered employee.
- •Tip 3: Gratuity received by non-government employees is exempt up to ₹20 lakh, so any excess is taxable; check your employer's computation against the formula.
- ✗Mistake 1: Entering your gross salary including HRA and allowances, which inflates the gratuity because the Act counts only basic plus DA.
- ✗Mistake 2: Rounding service up; the Act requires completed years, so 11 years and 11 months counts as 11 years.
Gratuity Exemption Limits You Can Claim
| Item | Value |
|---|---|
| Government employee | Exempt up to ₹20,00,000 |
| Non-government employee | Exempt up to ₹10,00,000 |
| Continuous service required | 5 years for the exemption to apply |
| Rounding note | Part years are capped at 7 days of wages |
| Tenure counted from | Date of appointment, not the date you joined the organisation |
What this figure assumes
Applies the statutory 15-days-of-last-drawn-wages formula for completed years, with a 7-day ceiling for an incomplete year, and five years continuous service as the threshold for exemption. It excludes group insurance, pension and other retirement benefits that may change your actual net worth on retirement.
Rates and rules checked as of Payment of Gratuity Act, 1972 as amended. These change with government notification — confirm against the linked source before you rely on the result.
Sources and References
- •Payment of Gratuity Act, 1972 - Section 4: 15 days per completed year, 7-day ceiling for a part year
- •Ministry of Labour and Employment - gratuity rules and notifications
Official sources are linked so you can confirm the current rate yourself. Check the linked page for the latest notification before relying on these figures.
Frequently Asked Questions
How is gratuity calculated in India?
For non-government employees covered by the Payment of Gratuity Act, 1972: gratuity = last drawn salary (basic + DA) × years of service × 15 ÷ 26. A year counts once you complete 6+ months beyond it, and you need at least 5 years of continuous service to qualify.
Is gratuity tax-free?
Up to ₹20,00,000 is exempt from tax under section 10(10) of the Income Tax Act. Anything above the cap is taxable as per your income slab. For government employees, the entire gratuity is tax-free.
What if my employer does not come under the Gratuity Act?
If the Act does not cover you, the employer usually follows a half-month-salary-per-year formula: salary × years × 15 ÷ 30. The tax exemption still applies up to ₹20 lakh, but the payable gratuity depends on the company policy.
Is gratuity paid on resignation or only retirement?
Gratuity is payable on retirement, resignation, retrenchment, death or disability — as long as you have completed 5 years of continuous service. On death or disability, the 5-year condition is waived.
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