This gratuity calculator works out the lump sum your employer owes you when you leave after years of service. Type your last monthly basic pay plus dearness allowance, your years and months of service, and whether your employer is covered by the gratuity law. You get the amount, the years counted and the formula used.
The rules changed when the new labour codes came into force. Fixed term employees now qualify after one year, and the definition of wages changed. Both points are explained below, with examples.
At a glance
- Formula (covered employer)15 × last basic plus DA × years ÷ 26
- Formula (not covered)15 × average basic plus DA × completed years ÷ 30
- Eligibility5 years of continuous service; 1 year for fixed term staff
- Part yearMore than 6 months counts as a full year
- Ceiling₹20 lakh under the law for private employers
- Example₹50,000 pay, 10 years 7 months: ₹3,17,308
How the gratuity calculator works
For an employer covered by the gratuity law, which applies to establishments with 10 or more employees, the formula is:
Gratuity = 15 × last drawn basic pay plus DA × years of service ÷ 26
The 26 stands for working days in a month and the 15 for fifteen days of wages per year of service. Any part year above 6 months counts as a full year. So 10 years and 7 months counts as 11 years, while 10 years and 5 months counts as 10.
Example: last basic plus DA ₹50,000, service 10 years 7 months. Gratuity = 15 × 50,000 × 11 ÷ 26 = ₹3,17,308. With 10 years 5 months it would be ₹2,88,462. Those two months make a ₹28,846 difference, so check your exact service dates.
Gratuity calculation for private employees not covered by the law
If your employer is not covered, gratuity is paid only if your contract or company policy provides it. The usual formula for such cases, also used for tax purposes, is 15 × average basic plus DA of the last 10 months × completed years ÷ 30. Part years are dropped.
| ₹50,000 pay, 10 years 7 months | Years counted | Gratuity |
|---|---|---|
| Covered (÷ 26, rounded up) | 11 | ₹3,17,308 |
| Not covered (÷ 30, completed years) | 10 | ₹2,50,000 |
Pick the right option in the gratuity amount calculator. If you are not sure whether your employer is covered, your HR team or appointment letter will say.
Who is eligible for gratuity
- Permanent employees: 5 years of continuous service with the same employer. The 5 year condition does not apply on death or disablement.
- Fixed term employees: under the Code on Social Security, now in force, they qualify after 1 year of service, worked out in proportion to their service.
- Continuous service: courts and labour departments have generally treated 4 years and 240 working days in the fifth year as enough in many cases. Ask your HR team how your employer counts it.
- Notice period counts as service if you serve it.
Gratuity is due within 30 days of leaving. If the employer delays, simple interest is payable on the amount.
What counts as wages for gratuity now
Gratuity uses wages, which traditionally meant basic pay plus dearness allowance. The labour codes added a rule: if allowances such as HRA and special allowance make up more than 50% of total pay, the excess is added back to wages. For many private sector salary slips where basic is only 30 to 40% of the total, this raises the wage base and so the gratuity.
Example: total monthly pay ₹1,00,000 with basic plus DA ₹35,000. Under the 50% rule, wages for gratuity become ₹50,000. For 10 years of service that is ₹2,88,462 instead of ₹2,01,923. Employers are still updating their pay structures, so confirm the wage figure with your HR team and type it into the calculator.
Gratuity ceiling and tax
The maximum gratuity payable under the law is ₹20 lakh. An employer may pay more under its own policy, but only up to ₹20 lakh is tax free for private sector employees in total over a working life. Central government employees have a higher ceiling of ₹25 lakh under their own rules. Gratuity paid to government employees is fully exempt from tax.
Example: basic plus DA ₹2,00,000 and 25 years of service gives ₹28,84,615 by formula, but the law caps it at ₹20 lakh. The retirement gratuity calculator above shows when the ceiling applies. Tax sections were renumbered under the new Income-tax Act, so check the current rule with a tax adviser if you are near the limit.
Gratuity after 5 years: quick table
For a covered employer, here is what 5 years of service gives at different monthly pay levels:
| Basic plus DA | Gratuity after 5 years | After 10 years |
|---|---|---|
| ₹20,000 | ₹57,692 | ₹1,15,385 |
| ₹40,000 | ₹1,15,385 | ₹2,30,769 |
| ₹60,000 | ₹1,73,077 | ₹3,46,154 |
A quick rule: each year of service earns a little over half a month's basic plus DA. Gratuity grows with both your pay and your years, so it is largest when you leave after a long stretch at a high salary.
Gratuity in your retirement plan
Gratuity is one of three employer linked lump sums for most salaried people, with the EPF balance and, for some, NPS. The EPF calculator and the NPS calculator estimate the other two. If you change jobs every few years, you may never cross 5 years anywhere, which means little or no gratuity. Count that when you compare a job offer.
To grow the lump sum after you receive it, see the FD calculator or the SCSS calculator if you are 60 or older.
This gratuity calculator follows the general rules. Your employer's final settlement, company policy and any court rulings that apply to your case decide the amount. For disputes, contact your state labour department. The labour codes are published by the Ministry of Labour and Employment.
Frequently asked questions
How is gratuity calculated?
For a covered employer: 15 × last basic pay plus DA × years of service ÷ 26, with more than 6 months counted as a full year. ₹50,000 pay and 10 years 7 months gives ₹3,17,308.
How much gratuity will I get after 5 years?
About 2.88 months of basic plus DA. With ₹40,000 basic plus DA it is ₹1,15,385. Use the gratuity calculator with your own pay.
Do fixed term employees get gratuity after 1 year?
Yes. Under the Code on Social Security, which replaced the old gratuity law, fixed term employees qualify after 1 year, in proportion to their service.
Is gratuity calculated on gross salary?
No. It is calculated on wages: basic pay plus DA. Under the labour codes, if allowances exceed 50% of total pay, the excess is added to wages for this purpose.
Is gratuity taxable?
For private employees, gratuity up to ₹20 lakh in total is tax free. Anything above is taxed as salary. Government employees' gratuity is fully exempt.
How many months does gratuity calculator count for a year?
For covered employers, service above 6 months in the last year counts as a full year. 7 years 6 months counts as 7 years; 7 years 7 months counts as 8.