Gratuity Calculator
Estimate gratuity payable & tax exemption
Enter years of service and last drawn salary to estimate gratuity payable and the tax-exempt portion.
Salary
Service
Employer
Good to know
- Permanent employees need 5 years of continuous service. Fixed-term employees qualify after 1 year, pro rata. The 5-year rule is waived on death or disablement.
- Formula: wages × 15 ÷ 26 × completed years (seasonal establishments: 7 days instead of 15). More than 6 months in the last year counts as a full year.
- Wages are Basic + DA, but must be at least 50% of total pay under the new Labour Codes — the excess of allowances is added back.
- Statutory gratuity is capped at ₹20 lakh. The ₹20 lakh tax exemption is a combined lifetime limit across employers; anything above it is taxable.
- Employees of small establishments outside the Act often get gratuity per company policy, commonly with 15 ÷ 30. Government employees follow separate pension rules and get gratuity fully exempt.
Results
Statutory gratuity payable
₹1,61,538
₹40,000 × 15 ÷ 26 × 7 years
Tax-exempt
₹1,61,538
Taxable
₹0
Wages used
₹40,000
Years counted
7
Per year of service: ₹23,077 (15 days' wages).
Estimate only, based on the Payment of Gratuity Act and the Code on Social Security as in force. Confirm eligibility, wage definition and the current ceiling with your HR team or a tax advisor for your exact figure.
How this calculator works
Under the Payment of Gratuity Act, 1972, gratuity for employees covered by the Act is calculated as (last drawn basic + DA) × 15 × completed years of service, divided by 26 — the standard number of working days in a month. It becomes payable after 5 years of continuous service with an employer (1 year for fixed-term employees under the Code on Social Security, effective 21 Nov 2025, and on death or disablement). Under the new Labour Codes, wages must be at least 50% of total pay, so this calculator can also apply that rule.
Gratuity Calculator formula
Gratuity = Last drawn (Basic + DA) × 15 × Years of service ÷ 26
Worked example
Priya's last drawn Basic + DA is ₹40,000 a month and she has worked 7 years 7 months.
- Years of service: 7 years 7 months rounds up to 8 years (more than 6 months counts as a full year).
- Gratuity = ₹40,000 × 15 × 8 ÷ 26
- = ₹48,00,000 ÷ 26 = ₹1,84,615
Priya receives ₹1,84,615 as gratuity, fully tax-exempt because it is below the ₹20 lakh limit.
Gratuity Calculator: FAQs
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