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FinCalc India

Gratuity Calculator

Gratuity is a lump-sum reward for long service, paid by an employer when an employee resigns, retires or is superannuated after at least five years (relaxed on death or disablement).

Enter your last drawn monthly Basic + DA and your total years of service.

Assumptions used
  • Uses only last drawn Basic + DA.
  • Tax-exempt portion assumes a non-government employee covered by the Act with no prior exemption used.

Enter your details

₹
1,00050,00,000
years
545

Service beyond 6 months in the final year rounds up to a full year.

Results

Gratuity Payable

₹4,15,385

Tax-exempt Portion
₹4,15,385
Taxable Portion
₹0
  • Years of service counted: 12 (service beyond 6 months in the last year is rounded up).
  • This gratuity is fully within the ₹20,00,000 tax-exemption ceiling.

Gratuity formula

For employees covered by the Payment of Gratuity Act:

Gratuity = 15 × (last drawn Basic + DA) × years of service ÷ 26

  • 15 = 15 days' wages for each completed year
  • 26 = assumed working days in a month

For employees not covered by the Act, the divisor is 30 instead of 26 and only fully completed years count.

Worked example

  1. Last drawn Basic + DA = ₹60,000/month; service = 12 years; covered by the Act.
  2. Gratuity = 15 × 60,000 × 12 ÷ 26
  3. Gratuity ≈ ₹4,15,385.

Tax treatment

  • Government employees: gratuity is fully tax-free.
  • Other employees covered by the Act: exempt up to the least of the actual gratuity, ₹20,00,000, or the formula amount.
  • The lifetime exemption ceiling of ₹20,00,000 applies across all employers.

Rounding: under the Act, service of more than 6 months in the last year is treated as a full year, so 12 years 7 months counts as 13.

Eligibility

You generally need five years of continuous service to qualify. This condition is waived if service ends due to death or disablement, in which case gratuity is paid to the nominee or legal heir.

Rates & rules: As on 2025. Source: Payment of Gratuity Act, 1972 and Income-tax exemption limit. The ₹20,00,000 exemption ceiling is set by government notification and can change.

This calculator is for education and illustration only. Results are estimates based on the inputs and assumptions shown and are not financial, investment, tax or legal advice. Verify figures with your bank, a registered adviser or the relevant government department before acting.

Frequently asked questions

Who is eligible for gratuity?

An employee who has completed at least five years of continuous service with the same employer, on resignation, retirement or superannuation. The five-year rule is waived on death or disablement.

Is gratuity tax-free?

For government employees, fully. For others covered by the Act, it is exempt up to the least of the actual amount, the formula amount, or the ₹20,00,000 lifetime ceiling; any excess is taxable as salary.

How are the years of service rounded?

Under the Payment of Gratuity Act, more than six months in the final year counts as a full year. Six months or less is dropped. Non-covered employees count only completed years.

Which salary components are used?

Only the last drawn Basic salary plus Dearness Allowance. Allowances such as HRA, bonus and overtime are not included.

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