What is the gratuity formula in India?

For employers covered by the Payment of Gratuity Act, gratuity equals last-drawn monthly salary (Basic + DA) multiplied by 15, multiplied by completed years of service, divided by 26. The 26 is the statutory count of working days in a month and 15 is fifteen days' wages per year.

How are part-years of service rounded?

Under the Act, any period beyond a completed year that is more than six months is rounded up to a full year, while six months or less is dropped. So 10 years 7 months counts as 11 years, but 10 years 5 months counts as 10 years.

Is there a maximum gratuity amount?

Yes. The statutory ceiling is ₹20,00,000 (twenty lakh rupees). Any gratuity computed above this is capped, and this same figure is the maximum amount exempt from income tax for covered private-sector employees.

When am I eligible for gratuity?

Gratuity is normally payable only after five years of continuous service with the same employer. The five-year condition is waived if service ends due to death or disablement, in which case gratuity is paid for the actual period served.

Does this use my gross salary or CTC?

No. The salary figure must be your last-drawn Basic plus Dearness Allowance (and commission on turnover where it applies). Allowances like HRA, bonuses and the gross CTC are excluded from the gratuity base.

India Gratuity / End-of-Service Calculator

The India Gratuity / End-of-Service Calculator works out the lump-sum gratuity an employee is entitled to when they leave a job, under the Payment of Gratuity Act, 1972. Gratuity is a statutory reward for long service, payable on resignation, retirement, superannuation, death or disablement after the qualifying period. This tool applies the correct formula, the year-rounding rule, and the ₹20 lakh ceiling so you can check your employer’s calculation or plan your exit.

How it works

For an employer covered by the Act (broadly, any establishment with ten or more employees), the calculation is:

Gratuity = (Last drawn monthly salary) × 15 × Completed years ÷ 26

Here “salary” is Basic + Dearness Allowance only, 15 is fifteen days’ wages for each completed year, and 26 is the statutory number of working days in a month. Service of more than six months beyond a full year rounds up to the next year; six months or less is dropped. The result is capped at the statutory ceiling of ₹20,00,000.

For an employer not covered by the Act, the common formula uses a 30-day divisor (half a month’s pay per year) and counts only fully completed years, so the tool switches the divisor to 30 and disables rounding in that mode.

Worked example

An employee with a last-drawn Basic + DA of ₹60,000 and 10 years 7 months of service under a covered employer: the 7 months round the service up to 11 years, giving 60,000 × 15 × 11 ÷ 26 = ₹3,80,769. Because that is below ₹20 lakh, the full amount is payable and tax-exempt.

Notes and tips

Eligibility requires five completed years of continuous service, except where service ends in death or disablement.
The ₹20 lakh cap is both the payable ceiling and the income-tax exemption limit for covered private-sector employees; amounts above it are taxable.
Use the figure on your last payslip for Basic + DA, not your CTC — using gross pay inflates the result. Everything is computed in your browser; nothing is sent anywhere.

India Gratuity / End-of-Service Calculator

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How it works

Worked example

Notes and tips