Skip to main content
CalcMasterIndia

Gratuity Calculator – Check Your Statutory Retirement Payout

Gratuity is a statutory monetary benefit provided by employers in India to employees in recognition of their long and meritorious service. Governed by the Payment of Gratuity Act, 1972, employees who complete at least 5 years of continuous service are entitled to a lump-sum gratuity payout upon resignation, retirement, or superannuation.

How to Use the Gratuity Calculator

  1. Enter your last drawn monthly Basic Salary and Dearness Allowance (DA).
  2. Enter your total years of continuous service with your employer (e.g., 6.5 years).
  3. Select whether your establishment is "Covered under Payment of Gratuity Act, 1972" (applies to most private companies with 10+ employees) or "Not Covered".
  4. Instantly view your calculated gratuity amount, the tax-exempt portion (up to the statutory ₹20 Lakh limit), and any taxable surplus.

Gratuity Formula & Tax Rules (1972 Act)

The gratuity formula depends on whether the organization is covered under the Payment of Gratuity Act: 1. Covered under the Act: Gratuity = (15 × Last Drawn Basic Salary + DA × Tenure in Years) ÷ 26 (Note: 26 represents working days in a month. Any service period of 6 months or more in a fractional year is rounded up to the next full year). 2. Not Covered under the Act: Gratuity = (15 × Last Drawn Basic Salary + DA × Completed Years of Service) ÷ 30 (Note: Equivalent to 0.5 × Salary × Completed Years. Fractional months are ignored). Statutory Tax Exemption Limit: The maximum tax-free gratuity under Section 10(10) of the Income Tax Act is ₹20,00,000 (₹20 Lakhs).

Corporate Employee (Covered under Act, 8.5 Years Service)

Last Drawn Basic + DA: ₹65,000/mo | Service: 8 Years 7 Months (8.58 yrs) | Covered: Yes

Because service exceeds 6 months in the 9th year, tenure is rounded up to 9 years. Gratuity = (15 × ₹65,000 × 9) ÷ 26 = ₹87,75,000 ÷ 26 = ₹3,37,500.

Total Gratuity: ₹3,37,500 | Tax-Exempt Portion: ₹3,37,500 (Below ₹20L) | Taxable Portion: ₹0

Senior Professional (Covered, 25 Years Service)

Last Drawn Basic + DA: ₹1,50,000/mo | Service: 25 Years | Covered: Yes

Gratuity = (15 × ₹1,50,000 × 25) ÷ 26 = ₹56,250,000 ÷ 26 = ₹21,63,462.

Total Gratuity: ₹21,63,462 | Tax-Exempt Gratuity: ₹20,00,000 (Statutory Max) | Taxable Gratuity: ₹1,63,462

Employee Not Covered under the Act (12.8 Years Service)

Last Drawn Basic + DA: ₹40,000/mo | Service: 12 Years 10 Months | Covered: No

Fractional months are ignored; only 12 completed years count. Gratuity = 0.5 × ₹40,000 × 12 = ₹2,40,000.

Total Gratuity: ₹2,40,000 | Tax-Exempt Gratuity: ₹2,40,000 | Taxable Gratuity: ₹0

Important Gratuity Rules

  • The minimum tenure required for gratuity eligibility is 5 years of continuous service, but the 5-year condition is waived in the unfortunate event of employee death or permanent disability.
  • Gratuity is calculated solely on your Basic Salary and Dearness Allowance (DA); special allowance, HRA, and bonuses are excluded from the calculation.
  • Employers cannot forfeit gratuity unless an employee has been terminated for riotous conduct, moral turpitude, or causing intentional financial damage to company property.
  • Companies can pay gratuity higher than the statutory formula if outlined in their employment contract, but amounts exceeding ₹20 Lakhs will be subject to income tax.
  • Ensure you fill out Form F (Gratuity Nomination Form) at the time of joining an organization to protect your family’s interests.

Common Mistakes to Avoid

  • Calculating gratuity using total CTC or Gross Salary instead of only Basic + DA.
  • Believing you can claim gratuity with less than 5 continuous years of service (except in disability/death cases).
  • Assuming the 26-day divisor applies to non-covered establishments.
  • Assuming that gratuity payments are always 100% tax-free regardless of the amount (the statutory ceiling is ₹20 Lakhs).

Frequently Asked Questions

Under Section 4(1) of the Payment of Gratuity Act 1972, an employee must complete a minimum of 5 years of continuous service with the same employer to become eligible for gratuity. However, the 5-year rule is waived in cases of death or disablement due to accident or disease.
The maximum tax-exempt limit for gratuity under Section 10(10) of the Income Tax Act is ₹20,00,000 (₹20 Lakhs) for non-government private employees covered under the Act. For Central/State Government employees, gratuity is 100% tax-free without any upper cap.
The number 26 represents the total number of working days in a month (30 days minus 4 Sundays), as laid down by the Supreme Court of India in the landmark Digvijay Woollen Mills case to determine the daily wage rate.
For establishments covered under the Act, if the service period in the final year exceeds 6 months (e.g., 5 years and 7 months), it is rounded up to the next full year (6 years). For establishments not covered, only fully completed years are counted.
No. Unlike EPF (which involves an employee deduction), gratuity is paid 100% by the employer out of company funds. Although some companies show gratuity as a component of annual CTC, no monthly deduction is made from your take-home pay.
An employer cannot withhold gratuity if an employee meets the 5-year service criteria, except in rare cases where the employee’s services were terminated for disorderly/riotous conduct, violence, or committing an offense of moral turpitude.
As per Section 7(3) of the Payment of Gratuity Act, the employer must pay the gratuity amount within 30 days from the date it becomes payable. If not paid within 30 days, the employer is liable to pay simple interest as prescribed by the government.
Form F is the nomination form submitted by the employee upon joining. Form I is the formal application submitted by an employee to the employer requesting disbursement of gratuity upon separation.

Related Calculators

Salary In-Hand Calculator

Calculate monthly take-home pay from your total CTC package.

EPF Calculator

Estimate your retirement savings and interest earned in the Employees Provident Fund.

NPS Calculator

Plan your long-term retirement pension and wealth accumulation under NPS.

Last updated: 2026-09-30