Gratuity Calculator

What is gratuity?

Gratuity is a lump-sum benefit an employer pays when you leave after long service, as a thank-you for continuous work. Under the Payment of Gratuity Act, 1972, it applies to establishments with 10 or more employees, and is generally payable after 5 years of continuous service (not required in case of death or disablement).

The formula

For employers covered by the Act: Gratuity = last drawn salary × 15 × years of service ÷ 26. Salary means basic plus dearness allowance. The 15 represents 15 days’ wages per year, and 26 is the number of working days in a month. Service of more than 6 months in the final year is rounded up to a full year.

For employers not covered by the Act, gratuity (if paid) is often calculated as salary × 15 × completed years ÷ 30, without rounding up.

Example

Last basic + DA ₹50,000, service 10 years 7 months, covered by the Act: service counts as 11 years, so gratuity = 50,000 × 15 × 11 ÷ 26 ≈ ₹3,17,308.

Tax and limits

For private-sector employees, gratuity is tax-exempt up to the lowest of the formula amount, the actual gratuity received and the statutory limit (currently ₹20 lakh). Government employees’ gratuity is fully exempt. The limit used here is stored in our admin config.

Gratuity and CTC

Many companies show gratuity (about 4.81% of basic) as part of CTC even though you receive it only after 5 years. The CTC breakup calculator shows how that affects your in-hand salary. Plan retirement alongside your EPF balance. This is an estimate; your employer’s calculation is final.

Quick answer

When is gratuity paid? Employers must pay it within 30 days of it becoming payable, usually at resignation, retirement or termination after eligibility.

Keep your appointment letter and relieving letter; they prove your service period if a gratuity dispute ever arises.