Gratuity Calculator: Calculate Gratuity Amount Online

What Is Gratuity?

Gratuity is a lump-sum payment made by an employer to an employee as recognition for long, continuous service. It is governed by the Payment of Gratuity Act, 1972, one of India's core labour laws.

The Act mandates gratuity for employees who complete at least 5 years of continuous service at an organisation with 10 or more people.

Unlike a provident fund, gratuity comes entirely from the employer, with no deduction from the employee's salary.

It is separate from other retirement income like NPS or EPF, and factors into an overall retirement plan as a lump sum, not a recurring payout.

Gratuity Formula: How to Calculate Gratuity

Employers in India calculate gratuity using the statutory formula:

Gratuity = (15 × Last Drawn Salary × Years of Service) / 26

Here, 15 is the days of salary paid per completed year, salary means Basic Pay plus DA only, and 26 is the statutory average working days in a month.

Employees effectively receive close to half a month's basic salary for every year of completed service.

Worked example

A basic salary of Rs 50,000 a month for 5 years works out to ₹1,44,231. At Rs 1,00,000 a month for the same 5 years, it is ₹2,88,462. Enter your own numbers in the calculator above for an exact figure.

Gratuity Eligibility Criteria

Not every employee automatically qualifies for gratuity. These are the conditions under the Act:

5 years of continuous service

You must have worked with the same employer for 5 continuous years. A partial year beyond 6 months rounds up to a full year.

Organisation with 10 or more employees

The Act applies to organisations with 10 or more employees on any day in the preceding twelve months.

Exception: death or disablement

If service ends due to death or permanent disablement, the 5-year requirement is waived entirely.

Contractual and temporary staff

Temporary, contractual, and permanent employees are all covered under the Act once eligibility conditions are met.

Gratuity Tax Treatment

Up to Rs 25 lakh of gratuity received by a private-sector employee is exempt from tax under Section 10(10). Anything above that is taxed at your slab rate.

This is a lifetime ceiling across every employer, not per employer. Government employees get full tax exemption on their entire gratuity, with no ceiling.

To see how a taxable gratuity portion affects your total tax bill for the year, run it through the Income Tax Calculator alongside your regular salary income.

Private vs Government Employee Gratuity

Government employees do not use the Payment of Gratuity Act formula. They receive Death-cum-Retirement Gratuity (DCRG) instead, calculated differently and capped differently.

Private-sector Gratuity Act formula compared with government DCRG.
Factor	Private Sector (Gratuity Act)	Government (DCRG)
Formula	(15 × Salary × Years) / 26	(6-month periods of service) × Last Pay / 4
Tax exemption	Up to Rs 25 lakh	Fully exempt, no ceiling
Statutory maximum payout	No ceiling on the formula result	Capped at Rs 20 lakh

Retirement Calculator

See how gratuity fits alongside EPF, NPS, and savings in your full retirement corpus.

Open calculator

How to Use This Gratuity Calculator

The calculator needs two inputs:

Basic Salary + DA: enter your last drawn basic salary plus Dearness Allowance. Exclude HRA, bonuses, commissions, or other allowances.
Years of Service: set the total duration of your employment, switching between years and months for a precise entry.
Check eligibility: the calculator shows whether you meet the 5-year minimum, and whether the 6-month rounding rule applied.
Review the result: read the gratuity payable, the tax-free and taxable split, and expand the accrual schedule to see growth over time.

Frequently Asked Questions

How is gratuity calculated in India?

Gratuity is calculated using the statutory formula under the Payment of Gratuity Act, 1972: Gratuity = (15 x Last Drawn Salary x Years of Service) / 26. Salary means Basic Pay plus Dearness Allowance only. The 26 represents average working days in a month, and 15 represents 15 days of salary per completed year of service.

What is the minimum service required for gratuity?

An employee must complete at least 5 years of continuous service with the same employer to be eligible. A partial year beyond the last full year is rounded up to a full year if it exceeds 6 months. There is no minimum service requirement in cases of death or permanent disablement; gratuity is payable from day one in those circumstances.

Is gratuity taxable in India?

For private-sector employees covered under the Gratuity Act, up to Rs 25 lakh of gratuity received is tax-exempt. Any amount above this limit is added to income and taxed at your slab rate. Government employees get full tax exemption on all gratuity received. The Rs 25 lakh limit is a lifetime ceiling across all employers.

What is the 6-month rounding rule?

If an employee has worked more than 6 months in the last partial year of service, that partial year counts as a full year. 9 years and 7 months is treated as 10 complete years; 9 years and 5 months is treated as 9 years.

Which salary components are included in gratuity calculation?

Only Basic Pay and Dearness Allowance (DA) are included. HRA, bonuses, transport allowance, medical allowance, and other special allowances are excluded. Your total CTC is not the number to use, only your basic plus DA component matters.

What is the maximum gratuity an employer must pay?

There is no statutory ceiling under the Payment of Gratuity Act; the formula applies regardless of how high the result is. For income tax purposes, the exemption is capped at Rs 25 lakh for private-sector employees. Many employer gratuity trust policies cap liability around Rs 20 to 25 lakh, but that is a policy limit, not a legal one.

Can gratuity be forfeited?

Yes, in specific circumstances. If an employee is dismissed for misconduct causing financial loss to the employer, gratuity can be forfeited up to the extent of that loss. If the misconduct involves violence, theft, fraud, or sexual harassment, the entire gratuity can be forfeited. Normal resignation or retirement does not attract forfeiture.

How is gratuity calculated for central government employees?

Central government employees receive Death-cum-Retirement Gratuity (DCRG) under the Central Civil Services (Pension) Rules: Gratuity = (Qualifying Service in completed 6-month periods) x Last Pay / 4, capped at Rs 20 lakh. This differs from the Payment of Gratuity Act formula used for private employees, and government gratuity is fully tax-exempt.

Is gratuity the same as severance pay or an end-of-service benefit?

No. Gratuity under India’s Payment of Gratuity Act is a statutory long-service reward paid after 5 years, calculated on Basic plus DA. Severance pay and end-of-service benefits (EOSB) are terms more common in the Gulf and other countries, usually paid on any termination regardless of tenure, under that country’s own labour law, not India’s Act. NRIs searching for an "end of service calculator" for a Gulf employer should check that country’s specific labour law formula, since it will not match this calculator’s Indian formula.

How much gratuity can I get after 5 years of service?

For a basic salary of Rs 50,000 per month and exactly 5 years of service: Gratuity = (15 x 50,000 x 5) / 26 = Rs 1,44,231. For Rs 1 lakh monthly basic and 5 years, it works out to roughly Rs 2,88,462. The amount scales proportionally with salary and service years; use the calculator above for your exact figure.

Is gratuity calculated on CTC or basic salary?

Gratuity is calculated on Basic Salary plus Dearness Allowance, not on CTC. CTC includes components like HRA, bonuses, and employer PF contributions that the gratuity formula excludes. If your CTC is Rs 12 lakh a year and basic is 40% of CTC, the calculation uses Rs 40,000 a month, not the full CTC equivalent.

How does gratuity fit into retirement planning?

Gratuity is one part of retirement income alongside EPF, NPS, and personal savings. It is a lump sum paid once, not a recurring pension. For a fuller retirement income projection that includes gratuity alongside other sources, use the Retirement Calculator.

What is Fermor?

Fermor is a financial platform built for India. All calculators are free to use, with a free account available to save your results. Fermor is building an automated financial action system using the Account Aggregator framework to connect real financial accounts and close the gap between knowing what to do with your money and actually doing it.