Gratuity Calculator (Gratuity Act Formula)
Estimate your gratuity payout on retirement, resignation or termination using the Payment of Gratuity Act 1972 formula — with tax-exemption status.
Minimum 5 years for gratuity eligibility.
≥ 6 months rounds the last year up; < 6 months drops it.
Result
Gratuity Amount
₹1,44,231
Effective Years (after rounding)
5 years
Formula Used
15/26 (Gratuity Act)
Tax Status
Fully exempt (≤ ₹20L)
Private sector employees covered by the Gratuity Act enjoy full exemption up to ₹20 lakh.
Gratuity is payable only after completing 5 years of continuous service. The ₹20 lakh tax-exemption limit applies per employer.
Concept
Gratuity is a lump-sum benefit paid by an employer to an employee as recognition of long and continuous service. Under the Payment of Gratuity Act 1972, any establishment with 10 or more employees is covered, and employees become eligible after completing at least 5 years of uninterrupted service with the same employer.
The divisor differs depending on Act coverage. The Act prescribes 26 — representing the number of working days in a month after excluding Sundays — which yields a slightly higher payout. Employers not covered by the Act typically use 30 calendar days. Years of service are rounded to the nearest half-year: 6 or more months in the last year counts as a full year; fewer than 6 months is dropped.
For private sector employees covered by the Act, up to ₹20 lakh of gratuity received is fully tax-exempt. Any amount above this limit is added to the employee's taxable income and taxed at the applicable slab rate. Government employees enjoy a full exemption with no upper cap.
Formula
Variables
Last Salary₹/month- Basic pay plus Dearness Allowance (DA) only — HRA, bonuses and other allowances are excluded.
15- Statutory entitlement of 15 days' wages for each completed year of service.
Years of Service- Effective years after rounding — 6+ months in the last year rounds up to a full year.
26- Working days per month under the Gratuity Act (excludes Sundays).
30- Calendar days per month — used when the employer is not covered by the Gratuity Act.