Gratuity Calculator

For employees covered by the Payment of Gratuity Act, gratuity = (last drawn Basic + DA × 15 × years of service) ÷ 26, where a part-year over 6 months rounds up to a full year. For employees not covered, it is (Basic + DA × 15 × completed years) ÷ 30 — half a month’s salary per completed year. Both are capped at ₹20 lakh.

Gratuity = (last drawn monthly Basic + DA × 15 × n) ÷ 26, where n is the number of years of service. The divisor 26 represents the working days in a month (30 days minus 4 weekly-off Sundays), so each completed year earns 15 days of wages.

The Payment of Gratuity Act, Sec 4(2), explicitly divides the monthly wage by 26 (working days) for covered, monthly-rated employees. For employees outside the Act, the Income-tax Sec 10(10)(iii) computation uses half a month’s salary per year, which is 15 ÷ 30. The covered formula therefore produces a higher figure for the same salary and tenure.

It depends on coverage. For covered employees, a part-year strictly greater than 6 months rounds up to a full year — so 7 years 7 months counts as 8 years, but 9 years 6 months stays at 9 years. For employees not covered, only fully completed years count and any extra months are dropped entirely, with no round-up.

The statutory ceiling is ₹20,00,000 (₹20 lakh), notified with effect from 29 March 2018. Any gratuity computed above ₹20 lakh is capped at ₹20 lakh for payment under the Act, and the same ₹20 lakh is the upper limit of the income-tax exemption.

For government employees, gratuity is fully tax-exempt. For non-government employees, the exemption under Sec 10(10) is the least of three amounts: the formula amount, the actual gratuity received, and ₹20 lakh. Anything above the exempt figure is taxed as salary income.

You generally need at least 5 years of continuous service with the same employer. The 5-year condition is waived if employment ends due to death or disablement, in which case gratuity is payable for the actual service rendered regardless of tenure.

Only Basic salary plus Dearness Allowance (DA) — the wages defined in Sec 2(s). Allowances such as HRA, bonus, commission, overtime and other perks are excluded. Covered employees use the last drawn Basic + DA; employees not covered use the average of the last 10 months’ Basic + DA.

No. Resigning before completing 5 years of continuous service means no statutory gratuity is payable, unless the exit is due to death or disablement. Some employers pay an ex-gratia amount voluntarily, but that is not a legal entitlement under the Act.

Coverage depends on whether the establishment has had 10 or more employees on any day in the preceding 12 months. Covered employees use the ÷26 formula on last drawn salary with the >6-month round-up; not-covered employees use the ÷30 (half-month) formula on the 10-month average salary counting only completed years. Both share the ₹20 lakh cap.

On death, the 5-year minimum service condition is waived and gratuity is paid to the nominee or legal heir for the service actually rendered. Many employers also follow a graded scale that pays a higher amount for early-career deaths; this calculator computes the standard formula amount, which is the statutory minimum.

Yes for the tax exemption. The ₹20 lakh income-tax exemption under Sec 10(10) is a lifetime limit aggregated across all employers — if you have already used part of it, the remaining exemption is reduced accordingly, even though each employer separately caps the payable amount at ₹20 lakh.

Yes, if the fixed-term contract runs for five or more continuous years with the same employer, the employee is entitled to gratuity under the Act. The Code on Social Security, 2020 (not yet fully in force) goes further and proposes gratuity eligibility after one year of service for fixed-term workers on a pro-rata basis — but that provision has not yet been notified into effect. Under the current Payment of Gratuity Act, the five-year minimum applies to contract employees just as it does to permanent ones, unless the exit is due to death or disablement.

Under Section 7(3) of the Payment of Gratuity Act, the employer must pay gratuity within 30 days of it becoming due. If payment is delayed beyond 30 days, the employer is liable to pay simple interest on the unpaid amount from the due date until the date of actual payment at the rate notified by the Central Government. The employee can file a claim with the Controlling Authority (usually the Labour Commissioner) if the employer fails to pay or disputes the amount.

Yes, but only in specific circumstances defined under Section 4(6) of the Act. Gratuity can be wholly or partially forfeited if your service was terminated for: (a) riotous or disorderly conduct, or any other act of violence; (b) any act constituting an offence involving moral turpitude, committed in the course of employment; or (c) wilful omission or negligence that caused damage or loss to the employer's property — in which case forfeiture is limited to the extent of the damage. An employer cannot forfeit gratuity merely for poor performance or a non-criminal disciplinary matter.

Yes, but under a different set of rules. For employees covered by the Central Civil Services (Pension) Rules, 2021 — central government civil servants — the maximum retirement gratuity and death gratuity was raised from ₹20 lakh to ₹25 lakh with effect from 1 January 2024, when the Dearness Allowance reached 50% of basic pay (a 7th Pay Commission trigger). This ₹25 lakh limit applies under CCS Pension Rules, not under the Payment of Gratuity Act. The Payment of Gratuity Act ceiling of ₹20 lakh continues to apply to private-sector and non-central-government employees. For income-tax purposes, government employees' gratuity remains fully exempt under Sec 10(10)(i) regardless of amount.