Gratuity Calculator
A gratuity calculator is a free online tool that computes the gratuity amount payable by your employer on retirement, resignation, or termination — as per the Payment of Gratuity Act, 1972.
Note: Gratuity is fully funded by your employer — no employee contribution. Rounded years: 10 years becomes 10 years for calculation.
Calculation as per Payment of Gratuity Act, 1972. Consult HR for exact amount.
How to use Gratuity Calculator
- Enter last drawn salary — Include basic + DA (dearness allowance).
- Enter years of service — Total years with the employer.
- See gratuity — View gratuity amount and tax-exempt portion.
- Compare act coverage — See calculation with or without Act coverage.
Key features
- Covers vs non-covered establishments
- Tax-exempt limit (₹20 lakh) applied
- Years of service rounding
- Basic + DA calculation
- Instant result
- Taxable amount display
What is Gratuity?
Gratuity is a lump sum payment made by an employer to an employee as a token of appreciation for their service — usually at retirement, resignation, or termination. Governed by the Payment of Gratuity Act, 1972, it's one of the most valuable long-term benefits for employees in India. Unlike PF, gratuity is fully funded by the employer — no employee contribution required. It's often the biggest single payout an employee receives after salary.
The Gratuity Formula
For establishments covered under the Gratuity Act: Gratuity = (15 × Last Drawn Salary × Years of Service) / 26. Here 'last drawn salary' means Basic + DA, and 26 represents the days in a month (excluding 4 Sundays). For non-covered establishments: Gratuity = (15 × Last Drawn Salary × Years of Service) / 30. This formula gives slightly lower gratuity for non-covered establishments.
Who is Eligible?
You must complete 5+ years of continuous service to be eligible for gratuity. However, if you complete 5 years and even a fraction more (like 5 years and 6 months), the years are rounded up. Exception: In case of death or disability, gratuity is payable regardless of years of service. The gratuity is paid within 30 days of it becoming due, and delays attract interest at the RBI rate.
Tax Rules on Gratuity
Gratuity up to ₹20 lakh in a lifetime is fully tax-exempt for private sector employees covered under the Payment of Gratuity Act. Amounts above ₹20 lakh are taxable as per your income slab. For government employees, gratuity is fully exempt with no limit. The ₹20 lakh limit is per employee, per lifetime — if you receive gratuity from multiple employers, the total exemption is capped at ₹20 lakh.
Pro tips
- Complete 5+ years of continuous service to qualify
- Years are rounded up — 5 years 6 months = 6 years
- ₹20 lakh lifetime exemption on gratuity tax
- Gratuity is in addition to PF and pension
Common use cases
- Planning retirement corpus
- Estimating payout on resignation
- Calculating tax on gratuity
- Comparing job offers with gratuity
- Understanding long-term benefits
Frequently asked questions
Who is eligible for gratuity?+
Employees who have completed 5+ years of continuous service. Exception: In case of death or disability, gratuity is payable before 5 years.
How is gratuity calculated?+
Covered: (15 × last drawn salary × years of service) / 26. Not covered: (15 × last drawn salary × years of service) / 30.
Is gratuity taxable?+
Gratuity up to ₹20 lakh in a lifetime is tax-exempt for private sector employees. Above that, it's taxed.
Do I get gratuity after resignation?+
Yes — if you complete 5+ years of continuous service.
What if I worked 5.5 years?+
Years are rounded up — 5.5 years becomes 6 years for gratuity calculation.
Need invoicing, billing & inventory?
Try ShopBill Pro — the full business software. Free plan available.