A gratuity calculator computes the lump-sum amount an employer pays to an employee upon retirement, resignation after 5+ years, or death/disability.
About this calculator
A gratuity calculator computes the lump-sum amount an employer pays to an employee upon retirement, resignation after 5+ years, or death/disability. In India, gratuity is governed by the Payment of Gratuity Act, 1972, which applies to organizations with 10 or more employees. The formula differs depending on whether the employer falls under the Act.
For Act-covered employees, gratuity = (Last monthly salary × 15 × years of service) ÷ 26, where 26 represents working days in a month. The maximum statutory gratuity under the Act is ₹20 lakh. Tax treatment also matters: for government employees, the entire gratuity is tax-exempt. For private-sector employees covered under the Act, the exemption is the least of: actual gratuity, ₹20 lakh, or 15 days' salary for each completed year of service.
Common uses
- Calculate gratuity amount before resignation or retirement for financial planning
- Determine if your employer falls under the Gratuity Act or outside it
- Check the statutory maximum of ₹20 lakh and whether your gratuity exceeds it
- Understand tax-exempt vs taxable portions of your gratuity receipt
- Plan your post-retirement corpus including expected gratuity alongside EPF and NPS
Frequently asked questions
What is the minimum service period to be eligible for gratuity?
You must complete at least 5 years of continuous service with the employer to be eligible for gratuity. An exception exists for death or disability — in these cases, gratuity is paid regardless of the service period. 'Continuous service' allows for paid leaves and authorized absences within the 5-year period.
What is included in 'salary' for gratuity calculation?
For employees covered under the Payment of Gratuity Act, 'salary' for gratuity calculation means basic salary plus dearness allowance (DA). Other components like HRA, conveyance, medical, or bonus are not included. This is an important distinction as the gratuity amount can differ significantly from your gross CTC.
What is the maximum gratuity a private employee can receive tax-free?
For private-sector employees covered under the Gratuity Act, the tax-exempt limit is the least of: actual gratuity received, ₹20 lakh (revised in 2019), or 15 days' salary for each completed year of service. Any amount beyond the exempt limit is added to taxable income. For government employees, the entire gratuity is tax-free with no upper limit.
How many days are considered for a year in gratuity calculation?
Under the Gratuity Act, 26 days are assumed as working days per month (excluding the 4 Sundays). So the formula is: (Basic + DA) × 15 ÷ 26 × Years of service. The '15' represents 15 days' salary per completed year of service. For employees outside the Act, many companies use a 30-day month and different tenure.