Gratuity Calculator
Gratuity = 15 × last drawn basic + DA × years of service ÷ 26 for employers covered by the gratuity law, so ₹50,000 a month for 10 years 7 months (counted as 11 years) gives ₹3,17,308. The calculator also covers employers outside the law and shows how much is tax-free.
By the Calculators With Steps team · Updated November 10, 2026 · How we check our math
- Service counted
- 11 years (10 years 7 months rounded up)
- Tax-free amount
- ₹3,17,308lifetime limit ₹20 lakh
- Taxable gratuity
- ₹0
- Gratuity as months of salary
- 6.35 months
- Tax-free₹3,17,308
Step-by-step working
- Years counted = 10 + 1 (more than 6 months) = 11
- Gratuity = 15 × 50,000 × 11 ÷ 26 = ₹3,17,308
Under the Payment of Gratuity Act, 1972, now part of the Code on Social Security, 2020, the employer must pay within 30 days. The ₹20 lakh tax-free limit is for your whole career, across all employers.
How to use the gratuity calculator
- Last drawn basic + DA – your monthly basic salary plus dearness allowance. Leave out HRA, special allowance, bonus and overtime.
- Years and months of service – continuous service with this employer.
- Employer type – covered if the employer is a factory, mine, plantation, port, railway company, or a shop or establishment that has had 10 or more employees in the last 12 months. Most companies are covered. Choose Central Government employee for retirement gratuity under the CCS (Pension) Rules.
- Reason for leaving – resignation and retirement need 5 years of service, fixed-term contracts 1 year, and death or disablement has no minimum.
The result shows the gratuity, the service counted, the tax-free and taxable parts, and the working.
Gratuity formula
Covered by the gratuity law (Payment of Gratuity Act, 1972, now part of the Code on Social Security, 2020):
Gratuity = 15 × last drawn salary × years of service ÷ 26
- Salary = last drawn monthly basic pay + DA
- Years of service = completed years, plus one more if the extra part is more than 6 months
- 15 ÷ 26 = 15 days’ wages, taking 26 working days in a month
Not covered:
Gratuity = 15 × average salary × completed years ÷ 30
Here salary is the average basic + DA of the 10 months before you leave, and part years are ignored.
Worked example
Ramesh leaves a private company after 10 years 7 months with a last basic + DA of ₹50,000 a month.
- The 7 extra months are more than 6, so service counts as 11 years
- Gratuity = 15 × 50,000 × 11 ÷ 26 = ₹3,17,308
- It is below ₹20 lakh, so the whole amount is tax-free
| Same salary, different cases | Gratuity |
|---|---|
| 10 years 7 months, covered employer | ₹3,17,308 |
| 10 years 6 months, covered employer (6 months does not round up) | ₹2,88,462 |
| 10 years 7 months, employer not covered (15/30, 10 years) | ₹2,50,000 |
| 10 years 7 months, Central Government (21 half-years × ¼) | ₹2,62,500 |
A senior employee with ₹1 lakh basic + DA and 20 years of service gets ₹11,53,846. With ₹2 lakh basic and 30 years, the formula gives ₹34,61,538, but statutory gratuity is capped at ₹20 lakh.
Eligibility: the 5-year rule and its exceptions
Gratuity is paid when employment ends through resignation, retirement, superannuation, termination, death or disablement, after at least 5 years of continuous service. The exceptions:
- Death or disablement – no minimum service; gratuity goes to the nominee or legal heirs.
- Fixed-term employees – since the labour codes took effect on 21 November 2025, gratuity is due on a pro-rata basis after 1 year of continuous service.
- 4 years and 240 days – some High Court rulings have counted this as 5 years for six-day-week establishments, but employers do not always accept it.
The employer must pay within 30 days of the gratuity becoming payable.
Tax on gratuity
For non-government employees, gratuity is tax-free up to a lifetime limit of ₹20 lakh, counting all gratuity you have ever received as tax-free. The exempt part is the least of the gratuity received, ₹20 lakh, and the formula amount (15/26 or 15/30). Anything above is added to your salary income for the year and taxed at your slab rate. Gratuity received by central and state government employees is fully exempt. Check the effect on your tax for the year with the income tax calculator.
Central Government employees
Retirement gratuity under the CCS (Pension) Rules, 2021 is ¼ × (basic pay + DA) for each completed six-monthly period of qualifying service, after at least 5 years. The maximum is 16.5 times monthly emoluments, reached at 33 years, and the ceiling was raised from ₹20 lakh to ₹25 lakh from 1 January 2024. With ₹1.5 lakh of basic plus DA and 33 years of service, gratuity is ₹24,75,000. Death gratuity follows a different scale and is not covered by this calculator.
Tips
- Check your nomination with HR; nominations are required after one year of service.
- Look at your basic-to-CTC ratio. Gratuity, like PF, depends on basic + DA, so a low basic means low gratuity.
- Plan the lump sum. A PPF account or an FD are common homes for retirement gratuity if you need safety.
Gratuity Calculator: frequently asked questions
What is the formula for gratuity?
For employers covered by the gratuity law: gratuity = 15 × last drawn monthly basic + DA × years of service ÷ 26. A part year of more than 6 months counts as a full year. For employers not covered, it is 15 × average basic + DA of the last 10 months × completed years ÷ 30.
How much gratuity will I get for 5 years of service?
Your monthly basic plus DA × 15 × 5 ÷ 26, which is about 2.88 months of basic pay. With a basic plus DA of ₹50,000 a month, 5 years of service gives ₹1,44,231.
Is gratuity paid before 5 years?
Normally no, but there are exceptions. On death or disablement there is no minimum service. Fixed-term employees qualify after 1 year of continuous service under the Code on Social Security, 2020, in force from 21 November 2025. Some courts have treated 4 years and 240 working days as 5 years, but this is not settled.
Why is 26 used in the gratuity formula?
A month is taken to have 26 working days, leaving out four weekly offs, so 15 ÷ 26 of a monthly salary equals 15 days' wages. Employers not covered by the gratuity law use 30 days instead, which gives a smaller amount.
How much gratuity is tax-free?
For private sector employees, gratuity is tax-free up to ₹20 lakh over your whole career, and anything more is taxed as salary. Gratuity received by central or state government employees is fully tax-free.
What is the maximum gratuity amount?
Under the gratuity law the maximum is ₹20 lakh, though an employer may pay more by contract. For Central Government employees under the CCS (Pension) Rules, the ceiling is ₹25 lakh from 1 January 2024.
How is gratuity calculated for central government employees?
Retirement gratuity is ¼ of a month's basic pay plus DA for each completed six-monthly period of qualifying service, up to 16.5 times basic plus DA and ₹25 lakh. With ₹50,000 basic plus DA and 10 years 7 months of service (21 six-monthly periods), it is ₹2,62,500.
Do the new labour codes increase gratuity?
They can. The Code on Social Security, 2020 defines wages as basic pay, DA and retaining allowance, but if allowances such as HRA and conveyance exceed 50% of total pay, the excess is added back to wages. If your basic is a small share of your CTC, your gratuity base may rise.
How we checked this page: every figure in the examples and FAQs above is produced by this calculator and verified by automated tests against known answers, and the rules and rates come from the sources below. Last updated . Spotted a problem? Tell us.