Gratuity Calculator

FREEFinance & Business

TOOLGratuity Calculator

Employment Details

Employee Type

Private sector employees covered under the Payment of Gratuity Act

Last Drawn Basic Salary + DA (Monthly)

Rs 50,000 per month

Years of Service

Years

Months (0-11)

Gratuity Amount

Eligible for gratuity under the Payment of Gratuity Act

Gratuity Payable

Rs 2,88,462

Tax-Exempt

Rs 2,88,462

Taxable

Rs 0

Tax Treatment

For private sector employees covered under the Payment of Gratuity Act, gratuity up to Rs 25,00,000 (Rs 25 lakh) is tax-exempt under Section 10(10)(ii). Any amount above this is taxable as per your income tax slab.

Formula Breakdown

Gratuity = (Basic + DA) x 15 / 26 x Years of Service

1.Last drawn salary (Basic + DA) = Rs 50,000

2.Years of service = 10 years

3.Gratuity = (50,000 x 15 x 10) / 26

4.Gratuity = 75,00,000 / 26

5.Gratuity = Rs 2,88,462

Key Facts

•15 days wages for each completed year of service (15/26 formula assumes 26 working days per month)
•If months of service exceed 6 months, it is rounded up to the next full year
•Maximum gratuity payable is Rs 25,00,000 (Rs 25 lakh) as per the 2024 amendment
•Minimum 5 years of continuous service required (waived in case of death or disability)

100% freeNo signupRuns in your browser

Recommended Partners

📈

Groww

Invest your gratuity — start on Groww

🪙

Zerodha

Grow your corpus with Zerodha

About Gratuity Calculator

Gratuity is a statutory retirement benefit under the Payment of Gratuity Act 1972, payable by employers to employees who complete at least 5 years of continuous service. With the 2024 amendment raising the maximum exempt limit to Rs 25 lakh, gratuity has become an even more valuable tax-efficient benefit. The calculation formula differs for private sector (26-day divisor) and government employees (30-day divisor), making a dedicated calculator essential for accurate planning.

How It Works

For private sector employees (covered under the Payment of Gratuity Act), the formula is: Gratuity = (15 × Last Drawn Basic + DA × Years of Service) / 26. The 26 in the denominator represents the average working days in a month (excluding Sundays). Each year of service contributes 15 days of salary.

For government employees, the divisor is 30 instead of 26 (using calendar days), resulting in a higher amount for the same salary and tenure. Service rounding applies: if the final year includes more than 6 months of service, it is rounded up to a full year; if 6 months or less, it is ignored.

The tax exemption rules: for Act-covered private employees, gratuity up to Rs 25 lakh is fully exempt under Section 10(10). For government employees, gratuity is fully exempt regardless of amount (central government employees). The calculator applies the correct exemption rule based on your sector selection.

Who Is This For

A 10-year private sector employee with Rs 80,000 last drawn Basic + DA calculating gratuity before tendering resignation.

A government schoolteacher calculating gratuity at retirement after 30 years of service using the 30-day divisor.

An HR manager verifying the gratuity amount in an F&F settlement letter before issuing it to a departing employee.

A 4-year 9-month employee checking if they round up to 5 years of service and become eligible for gratuity.

Scope note: Uses Payment of Gratuity Act 1972 formula with the 2024 maximum limit of Rs 25 lakh. Private sector uses 26-day divisor; government sector uses 30-day divisor. Does not model gratuity from employers not covered by the Act (establishments with fewer than 10 employees), who may voluntarily pay gratuity at different rates. Gratuity calculations for fixed-term contract employees under Labour Code 2025 (1-year eligibility) use standard formulas but the tool may need manual adjustment for short service periods.

Disclaimer: This calculator is for informational and educational purposes only and does not constitute financial, tax, or legal advice. Results are estimates based on publicly available tax slabs and formulas. Consult a qualified Chartered Accountant, tax professional, or financial advisor for guidance specific to your situation. Built and maintained by the WOWHOW Team with 14+ years of software development experience.

How to Use

Enter your last drawn basic salary plus dearness allowance

Enter your total years and months of service

Select whether you are a government or private sector employee

View your gratuity amount with formula breakdown and tax details

Frequently Asked Questions

You need minimum 5 years of continuous service to be eligible for gratuity under the Payment of Gratuity Act 1972. In case of death or disability, this requirement is waived.

The maximum gratuity payable under the Act is Rs 25,00,000 (25 lakh), as per the 2024 amendment.

Gratuity = (Last drawn salary x 15 x Years of service) / 26. Salary means basic pay plus dearness allowance.

No. The 15/26 formula (15 days per year using a 26-day month) applies to private sector employees under the Payment of Gratuity Act 1972. Government employees use a 15/30 formula (30-day month), which gives a higher gratuity amount. Select your sector correctly in the calculator to get the right result.

For employees covered under the Payment of Gratuity Act, gratuity up to Rs 25 lakh (as per 2024 amendment) is fully tax-exempt. Any gratuity above Rs 25 lakh is taxable as income in the year of receipt. For employees not covered under the Act, the exemption is the minimum of actual gratuity, Rs 25 lakh, or a half-month salary formula.

Gratuity is calculated on continuous service. If you left and rejoined the same employer, the earlier stint typically does not count unless the break was approved leave. Some employers with good HR practices count total tenure — check your appointment letter or HR policy. For multiple employers, gratuity is calculated separately for each employment.