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Gratuity Calculator

Estimate the gratuity you will receive when you leave a job, using the statutory formula, service rounding rules and the current ceiling.

Rules last reviewed: September 2026

Disclaimer: Results are estimates for informational purposes only and are not professional financial, tax or legal advice. Rules change — please verify with official sources or a qualified professional before making decisions.

What is gratuity?

Gratuity is a lump-sum benefit an employer pays as thanks for long service. It is normally payable after 5 years of continuous service, on retirement, resignation, death or disability. Under the new Labour Codes, fixed-term employees become eligible after just 1 year, paid pro-rata.

The gratuity formula

Covered by the Act: Gratuity = (Basic + DA) × 15/26 × years of service
Not covered: Gratuity = (Basic + DA) × 15/30 × completed years

The figure 15 stands for 15 days' wages per year, and 26 is the number of working days in a month. For covered employees, a final part-year of more than 6 months is rounded up to a full year.

Worked example

₹50,000 Basic + DA, 10 years of service

Covered by the Act (15/26)
₹2,88,462
Not covered (15/30)
₹2,50,000

Add 7 months of service and a covered employee's service is counted as 11 years.

Limit and tax treatment

  • Gratuity is capped at ₹20 Lakh (₹20,00,000) under the current notification.
  • For most private-sector employees, gratuity is tax-exempt up to the lowest of the actual amount received, the formula amount and the ceiling.
  • Wages for the formula are your last drawn Basic plus Dearness Allowance. Under the new Labour Codes, wages must generally be at least 50% of total pay, which can raise gratuity.

Planning for your gratuity

  • Gratuity depends on your last drawn salary, so it rises with every increment.
  • You must usually apply within 30 days of it becoming due; the employer has 30 days to pay.
  • Delayed payment attracts simple interest, so keep your paperwork and nomination up to date.

Frequently asked questions

Who is covered under the Payment of Gratuity Act?

Establishments such as factories, mines, shops and offices with 10 or more employees are covered. Employees of covered establishments use the 15/26 formula; others use 15/30 under their employer's policy.

Do I need to complete 5 years to get gratuity?

Usually yes, except in case of death or disability, where the minimum service does not apply. Fixed-term employees under the new Labour Codes become eligible after one year.

How is service rounded off?

For covered employees, more than 6 months beyond the last completed year counts as a full year. For example, 10 years and 7 months counts as 11 years.

Is gratuity taxable?

Government employees receive it tax-free. For others, the exemption is limited to the lowest of the amount received, the formula amount and the ceiling; any excess is taxable as salary.

Who receives gratuity if the employee dies?

The nominee or legal heirs receive it, and the five-year minimum service does not apply. Keep your nomination updated with your employer.