How to use the Gratuity Calculator
- Enter your last drawn monthly wage for gratuity, which is basic pay plus dearness allowance (DA). Under the new labour codes your employer may add some allowances to this figure, so use the wage figure shown in your gratuity statement if it differs.
- Enter your completed years of service and any extra months.
- Choose whether your employer is covered by the Gratuity Act. Most private companies with 10 or more employees are, so the default is Yes.
- Read the gratuity amount and the number of years counted.
Formula used
Gratuity = (Last drawn salary × 15 × Years of service) ÷ 26 for employers covered by the Act, or ÷ 30 for those not covered. Service of more than 6 months in the final year is rounded up to a full year. The ceiling used here is ₹20,00,000.
Worked example
Here is the Gratuity Calculator worked through with the example values shown above, so you can check each step by hand.
| Inputs | |
|---|---|
| Last drawn monthly wage (basic + DA, or your employer’s wage figure) | ₹50,000 |
| Years of service | 10 years |
| Extra months | 0 months |
| Employer covered by the Act? | Yes (uses 26 days) |
| Result | |
| Gratuity amount | ₹2,88,462 |
| Years counted | 10 |
| Eligibility | Usually eligible (5+ years of service) |
The gratuity formula with an example
For employers covered by the Act, gratuity = (last drawn monthly salary × 15 × years of service) ÷ 26. The 15 stands for 15 days of salary for each year of service, and 26 is the number of working days assumed in a month. For a last drawn salary of ₹50,000 and 10 years of service, the gratuity is 50,000 × 15 × 10 ÷ 26, which is ₹2,88,462.
For employees not covered by the Act, the divisor is 30 instead of 26. With a salary of ₹40,000 and 5 years of service, gratuity is ₹1,15,385 for a covered employer and ₹1,00,000 for an employer using the 30-day method.
How service years are counted
Only the final year’s part-period is rounded. If you have worked more than 6 months beyond a full year, it is counted as another full year, so 9 years and 7 months counts as 10 years. If the extra period is exactly 6 months or less, it is ignored, so 9 years and 6 months counts as 9 years. This calculator follows that rule.
Use your last drawn wage, not an average. Traditionally only basic pay plus DA counted. Under the wage definition in the Code on Social Security, 2020, which took effect with the new labour codes on 21 November 2025, basic pay plus DA must make up at least 50% of total pay for these purposes, and allowances above the 50% share are added back into wages. So a package with a small basic pay may now produce a higher wage figure than before. Enter the wage figure your employer’s payroll uses.
Eligibility, limits and tax
Gratuity is generally payable to regular employees after 5 years of continuous service, with exceptions such as death or disablement. Under the new labour codes, in force from 21 November 2025, fixed-term employees can qualify after one year of service, with the amount paid in proportion to the time worked. Employers must pay within 30 days of the gratuity falling due. Confirm your eligibility with your HR team or the latest government notification.
There is a ceiling on the statutory gratuity amount, which this calculator treats as ₹20,00,000. For example, a salary of ₹1,00,000 and 30 years of service gives ₹17,30,769. Tax exemption on gratuity also has limits that differ by employee type and can change, so check the current income tax rules before you plan around it.
Frequently asked questions
What is the formula for gratuity?
Gratuity = (last drawn monthly basic + DA) × 15 × years of service ÷ 26 for employers covered by the Act, or ÷ 30 for those not covered. The final year is rounded up only if more than 6 months have been completed.
Who is eligible for gratuity?
Regular employees generally need 5 years of continuous service in an establishment covered by the law, with exceptions such as death or disablement. Under the new labour codes in force from 21 November 2025, fixed-term employees can qualify after one year. Check with your employer.
Which salary components are used for gratuity?
Traditionally basic salary and dearness allowance. Under the new wage definition in force from 21 November 2025, allowances are added back if basic plus DA is below 50% of total pay, so use the wage figure your employer’s payroll uses.
What is the maximum gratuity amount?
The statutory ceiling has been ₹20 lakh, and the calculator caps results at that amount. Confirm the current limit with your employer or the latest notification, as it can be revised.
Is 4 years and 8 months enough for gratuity?
In practice, courts have treated 4 years and 240 days of continuous service in some situations as enough, but this depends on the case and the employer’s rules. Ask your HR team or a labour lawyer for your specific case.
Is gratuity taxable?
Gratuity is exempt from tax up to a limit, and the limit and conditions differ for government employees, private employees covered by the Act and others. Check the current income tax rules for your situation.
This calculator gives estimates for information only. Actual figures from a bank, employer, tax authority or doctor may differ. It is not financial, tax, legal or medical advice.