What is the gratuity formula under the Act?

For establishments covered by the Payment of Gratuity Act 1972, gratuity equals (15 ÷ 26) × last drawn monthly salary × completed years of service. The 26 represents working days in a month and 15 represents half a month's wages per year.

What counts as salary for gratuity?

Salary means last drawn basic pay plus dearness allowance (DA). It does not include house rent allowance, bonuses, overtime, or other allowances. Use the basic plus DA figure as the wage base in this calculator.

How are part-years rounded?

For covered establishments, a part-year of six months or more counts as a full year, while under six months is dropped. So 7 years 8 months counts as 8 years, but 7 years 4 months counts as 7 years.

What is the maximum gratuity?

The tax-free statutory ceiling under the Act is ₹20 lakh (₹2,000,000). Any computed amount above that is capped for the purpose of the Act, though an employer may pay more voluntarily, with the excess potentially taxable.

Who is eligible for gratuity?

An employee generally becomes eligible after five years of continuous service, payable on resignation, retirement, or superannuation. The five-year rule is waived on death or disablement. Confirm coverage and continuity with your HR team.

India Gratuity Calculator

The India Gratuity Calculator computes the lump-sum gratuity payable to an employee on exit under the Payment of Gratuity Act, 1972. Gratuity is a statutory reward for long service, paid on resignation, retirement, superannuation, or (without the service threshold) on death or disablement, for establishments with ten or more employees.

How it works

For a covered establishment, the formula is:

gratuity = (15 / 26) × last drawn salary × completed years

Here last drawn salary is the final monthly basic pay plus dearness allowance (DA) — no HRA, bonus, or overtime. The 26 is the conventional number of working days in a month and 15 represents half a month’s wages credited per year of service.

Years of service are rounded using the six-month rule: a part-year of six months or more rounds up to a full year, and under six months is dropped. The final figure is then capped at the statutory tax-free ceiling of ₹20 lakh (₹2,000,000); any excess is not protected by the Act, though an employer may still choose to pay it.

Example and notes

An employee with a last drawn basic-plus-DA of ₹50,000 and 10 years 7 months of service rounds to 11 years. Gratuity is (15 / 26) × 50,000 × 11 = ₹3,17,308 (approximately), which is below the ₹20 lakh cap and so is paid in full. A senior employee with a very high salary and long tenure can exceed the cap, in which case the payout under the Act is limited to ₹20 lakh. Eligibility normally requires five years of continuous service. This is an estimate of the statutory entitlement and not tax or legal advice. All computation runs locally in your browser.