Estimate the gratuity payable on leaving a job, using the standard formula from the Payment of Gratuity Act in India.
How to use
- Enter your last drawn basic salary plus dearness allowance per month.
- Enter completed years and any extra months.
- Pick whether your employer is covered by the Act and press Calculate.
Good to know
This is an estimate for information only. Your employer or HR team confirms the final figure. Explore more on the Tools page.
What is gratuity?
Gratuity is a lump sum that an employer pays to an employee as a thank you for long service. In India it is governed by the Payment of Gratuity Act, 1972, which applies to establishments that meet certain size conditions, such as factories, mines, shops and many other organisations. Gratuity is paid when you leave the company after retirement, resignation, superannuation, or in the event of death or disablement. Many private employers also pay it even when the Act does not strictly apply, using a similar formula.
This gratuity calculator gives you a quick estimate based on your last drawn salary and the length of your service. Use it when you are thinking about changing jobs, planning your finances before retirement, or checking whether the figure on a settlement letter looks right.
The gratuity formula
For employees covered by the Act, the usual formula is last drawn monthly salary multiplied by 15, multiplied by the years of service, divided by 26. The salary here means basic pay plus dearness allowance, and not allowances such as house rent, bonus or special allowance. The figure 26 reflects the number of working days in a month and 15 represents fifteen days of wages for each year of service. For employees not covered by the Act, a common approach is to divide by 30 instead of 26, since the month is treated as 30 days.
Service is rounded in a special way. If your extra months of service are six or more, they count as a full year. If they are less than six months, they are ignored. So eight years and seven months is treated as nine years, while eight years and four months is treated as eight years. The calculator applies this rule automatically.
Eligibility conditions
The general rule is that you become eligible for gratuity after completing five years of continuous service with the same employer. There is an exception in case of death or disablement, where the five year condition does not apply. Labour laws in India have been going through reforms in recent years, and the rules for certain categories of employees, such as fixed term staff, may differ from the traditional position. Please check the current rules or ask your HR department about your own case.
A worked example
Suppose your last basic salary plus dearness allowance is 50,000 a month, and you have completed 8 years and 4 months in a company covered by the Act. The extra four months are less than six, so the service counts as 8 years. Gratuity equals 50,000 multiplied by 15, multiplied by 8, divided by 26. That works out to about 230,769. If the extra months had been seven, service would count as 9 years and the figure would be about 259,615.
Tax and the upper limit
There is a statutory ceiling on the gratuity amount for employees covered by the Act, currently 20 lakh rupees. Tax treatment depends on whether you are a government employee or a private employee, and on whether the Act applies to your employer. In many cases a portion up to specified limits is exempt from income tax, and anything above may be taxed as salary. Because tax rules change from year to year, confirm the current position with the latest official guidance or a tax professional before you rely on any figure.
Tips to make sure you get your full gratuity
- Check that your basic pay and dearness allowance are correctly recorded in your payslips, since these decide the salary used in the formula.
- Keep a record of your joining date and any breaks in service.
- If you plan to quit, check whether you are close to completing the five year mark. Leaving a few weeks early can cost you a large amount.
- Apply in writing, using the prescribed form, within the time limit your employer or the Act specifies.
- If payment is delayed beyond the allowed period, you may be entitled to interest. Ask HR or consult a labour authority.
Gratuity versus provident fund
People often confuse gratuity with the provident fund. Provident fund is a savings scheme where both you and your employer contribute every month, and you can withdraw the balance with interest when you leave. Gratuity is paid only by the employer, only once, and depends on your length of service. They are separate benefits and you can receive both. To plan retirement income, you may also want to try our Compound Interest Calculator and SIP Calculator.
Frequently asked questions
How is gratuity calculated?
Last drawn basic salary plus dearness allowance multiplied by 15, multiplied by years of service, divided by 26 for covered employees.
Do I get gratuity if I work less than five years?
Usually not, except in case of death or disablement or where a newer rule gives specific categories of employees earlier eligibility. Check with your employer.
What counts as salary in the formula?
Basic pay and dearness allowance. House rent allowance, bonus and other allowances are normally excluded.
Is there a maximum amount?
For employees covered by the Act there is a statutory ceiling, currently 20 lakh rupees.
Is this the exact amount I will receive?
No. It is an estimate. Your employer calculates the final amount from your service records.
More examples
Consider three employees with the same salary of 40,000 a month for basic and dearness allowance. The first has worked 5 years and 2 months. The extra two months are ignored, so the years counted are 5 and the gratuity is 40,000 times 15 times 5 divided by 26, about 115,385. The second has 12 years and 8 months. The extra months are more than six, so the years counted are 13 and the gratuity is about 300,000. The third has only 3 years of service and is normally not eligible under the usual rules, which is why the tool shows a reminder. These examples show how a few months can change the result.
Documents to keep ready
- Your appointment letter and joining date.
- Recent payslips that show basic pay and dearness allowance.
- The relieving letter or resignation acceptance.
- Your bank details and an identity proof for the payout.
- A copy of the gratuity application, usually the prescribed form.
What if your employer delays payment?
The law expects gratuity to be paid within a fixed time after it becomes due. If you face a delay, first write to the HR or accounts team and keep a copy. If there is no response, you can approach the controlling authority under the Act in your area. Ask a labour officer or a lawyer about the exact steps and the interest you may claim.
Planning tip
Treat gratuity as a one time bonus for your future plans. Many people use it for an emergency fund, a home down payment or to start an investment. Our SIP Calculator shows how a lump sum and a monthly plan can grow over the years.