worldofcalcsGratuity Calculator
About Gratuity
Gratuity is a benefit given by the employer to the employee for services rendered. It is usually paid at retirement or resignation.
Input Details
- Basic Salary: Monthly Basic + Dearness Allowance (DA).
- Years of Service: completed years of continuous service (5 for permanent employees, 1 for fixed-term employees). A final year of more than 6 months counts as a full year.
How to Use
- Enter your last drawn monthly Basic Salary (+ DA).
- Enter the number of completed years of service.
- View the estimated gratuity amount.
Calculation Logic
- Formula: (15 × Last Drawn Salary × Tenure) / 26.
- 15 days wages for every completed year of service.
- Month is considered as 26 working days.
- Gratuity up to ₹20 lakh is tax-exempt for private-sector employees (lifetime limit).
What is gratuity?
Gratuity is a lump sum your employer pays as a reward for long service, usually when you resign, retire or are laid off after at least five years of continuous service. It is a legal entitlement for employees of establishments covered by gratuity law (generally those with 10 or more employees), and the amount depends only on your last drawn salary and years of service, not on your performance.
Gratuity formula
Last drawn salary means basic pay plus dearness allowance. The 15 represents 15 days' wages for every completed year of service, and 26 is the number of working days assumed in a month. For employees covered by the law, a final year with more than six months of service counts as a full year. Employers not covered by the law usually pay half a month's average salary for each completed year, which works out to a smaller amount.
Eligibility and tax
- Permanent employees qualify after 5 years of continuous service. The 5-year rule does not apply on death or disablement.
- Fixed-term employees qualify after 1 year of service, on a pro-rata basis, under the Code on Social Security, 2020 (in force since 21 November 2025).
- Under the labour codes, if allowances make up more than half of your total pay, the excess counts as wages, which can increase your gratuity.
- Tax: gratuity is exempt up to ₹20 lakh over your lifetime for private-sector employees. Government employees' gratuity is fully exempt.
- Your employer must pay within 30 days of it becoming payable; delays attract interest.
- Gratuity can be withheld only in limited cases, such as termination for misconduct that caused the employer loss, or for violent or illegal acts.
Worked example: 9 years 8 months of service
- Last drawn basic + DA: ₹50,000 a month. Service: 9 years and 8 months
- The final 8 months are more than six months, so service is rounded up to 10 years
- Gratuity = 15 × ₹50,000 × 10 ÷ 26 = ₹2,88,462
- For a private-sector employee this is fully tax-free, as it is within the ₹20 lakh lifetime limit
Gratuity by salary and years of service
Using the 15/26 formula for employees covered by gratuity law.
| Monthly basic + DA | 5 years | 10 years | 20 years | 30 years |
|---|---|---|---|---|
| ₹25,000 | ₹72,115 | ₹1,44,231 | ₹2,88,462 | ₹4,32,692 |
| ₹50,000 | ₹1,44,231 | ₹2,88,462 | ₹5,76,923 | ₹8,65,385 |
| ₹1,00,000 | ₹2,88,462 | ₹5,76,923 | ₹11,53,846 | ₹17,30,769 |
Amounts above ₹20 lakh are taxable for private-sector employees. Figures are before any tax.