Gratuity Calculator

Calculate gratuity payable based on last drawn salary and years of service. Free, privacy-first — inputs never leave your browser.

Savings🇮🇳India · FY 2026-27Reviewed Apr 2026No sign-up · Runs in your browser

Details

Last Basic + DA (monthly)₹50,000

Years of Service10yrs

Result

Gratuity Payable

₹2,88,462

Tax-free Limit

₹20,00,000

Taxable (if any)

₹0

For estimation only. Not professional financial, tax, or legal advice. Consult a qualified advisor before making decisions. Full disclaimer.

How it works

What is gratuity?

Gratuity is a lump-sum retirement benefit paid by an employer to an employee in recognition of continuous service. For private-sector workers it is governed by the Payment of Gratuity Act, 1972 — the official text is at labour.gov.in. Gratuity becomes payable on resignation, retirement, death, or disability, provided the employee has completed at least 5 years of continuous service (the 5-year rule is waived in cases of death or permanent disability).

How gratuity is calculated

For employees covered under the Act, the statutory formula treats a working month as 26 days (excluding Sundays) and pays 15 days of wages for every completed year:

Gratuity = (Last drawn Basic + DA) × 15 / 26 × Years of service

Any fraction of a year over 6 months counts as a full year. For employees not covered under the Act, the formula is (Basic + DA) × 15/30 × years — paying on a 30-day month instead. Employers regulated by the Act may offer more, never less.

Worked example — 12 years of service, last basic ₹50,000

Monthly (Basic + DA) = ₹50,000; years = 12. Gratuity = 50,000 × 15/26 × 12 = ₹2,76,923. If you had worked 12 years 7 months, it would round up to 13 years = ₹3,00,000. Since the amount is below the ₹20 lakh tax-free ceiling, the entire payout is exempt under section 10(10)(ii) for private-sector employees.

Tax and regulatory context

Section 10(10): tax exemption cap of ₹20 lakh aggregate across employers (revised from ₹10L in 2018).
Government employees: gratuity is fully exempt from tax.
Nomination (Form F): mandatory under the Act after 1 year of service.
Interest on delay: employer owes simple interest at PF rate if paid beyond 30 days of separation.
Forfeiture: allowed only for proven misconduct causing loss to employer (section 4(6)).
Ceiling under the Code on Social Security, 2020: once notified, fixed-term employees become eligible after 1 year.

Common mistakes

Assuming CTC gratuity is paid out annually. The 4.81% accrual in your CTC is a bookkeeping entry; you receive nothing until you exit after 5+ years.
Leaving at 4 years 11 months. Completing one more month tips you over the 5-year eligibility threshold.
Ignoring DA. If dearness allowance is part of your CTC, it must be added to basic for the formula.
Not nominating. On death without Form F, legal heirs face delay and paperwork.
Misapplying the ₹20L cap. It is aggregate across your lifetime, not per employer.

Common questions about Gratuity

When am I eligible for gratuity?+

Under the Payment of Gratuity Act 1972, you are eligible after 5 years of continuous service with the same employer. Exceptions waiving the 5-year rule: death or disability (paid to nominee/employee regardless of tenure). Applies to establishments with 10+ employees. Government employees are covered under separate CCS rules. Contract staff, daily wagers, and apprentices may or may not be covered depending on their direct employment status.

How is gratuity calculated?+

Formula: (Last drawn basic + DA) × 15 × years of service ÷ 26. The "26" represents monthly working days. For 10 years service at ₹40,000 basic+DA: gratuity = 40,000 × 15 × 10 ÷ 26 = ₹2,30,769. Fraction of year above 6 months rounds up to full year. Employers not covered under the Act may use different formulas (15 × monthly wage × years ÷ 30).

What is the tax-free gratuity limit?+

Up to ₹20 lakh is fully tax-free (cumulative lifetime cap across all employers) for private-sector employees under the Payment of Gratuity Act. Government employees enjoy unlimited exemption. Any amount beyond ₹20 lakh is taxable at slab rate in the year of receipt — you can claim relief under Section 89 for spreading it across prior years to reduce tax impact.

Can gratuity be forfeited?+

Yes, partially or fully — if termination is for: (1) willful damage to employer property (deducted to extent of loss); (2) riotous or disorderly conduct/violence; (3) moral turpitude offences in connection with employment. Must be documented via formal disciplinary proceedings. Cannot be forfeited for ordinary performance issues or voluntary resignation. Employer must pay within 30 days of exit; delays attract simple interest.

Is gratuity paid on resignation or only retirement?+

Paid on any exit — resignation, retirement, termination, death — provided 5+ years completed. Some companies show it as an annual CTC component, but it's only realized on exit after 5 years. If you quit at 4 years 11 months, you get nothing. Strategic tip: if close to 5 years, consider requesting short tenure extension — losing ₹1.5-3 lakh gratuity for a month's notice period isn't ideal.

How long does the employer have to pay gratuity?+

Within 30 days of the employee's last working day. Beyond that, the employer owes simple interest at the rate notified by the central government (~10% currently). You can file a complaint with the Controlling Authority (Labour Commissioner) within 90 days, and they will compel payment with interest + penalty. Ensure you submit Form I (application) to the employer formally, with acknowledgement.