Gratuity Calculator (India)

Under the Payment of Gratuity Act, 1972 gratuity is payable to an employee who has rendered continuous service of not less than five years, when employment ends on superannuation, retirement, resignation, death or disablement. The Act covers factories, mines, oilfields, plantations, ports, railway companies, shops and other establishments employing ten or more persons. The five-year condition is expressly waived where the employment ends because of death or disablement — in that case gratuity is payable however short the service, and on death it goes to the nominee or the heirs. Employers outside the Act often pay gratuity anyway as a contractual benefit; then the terms of your contract or scheme decide the amount, not the Act.

Section 4(2) of the Act says the employer pays fifteen days’ wages, based on the wages last drawn, for every completed year of service and for any part of a year in excess of six months. For a monthly-rated employee those fifteen days’ wages are worked out by dividing the last drawn monthly wage by twenty-six and multiplying by fifteen — a month is treated as twenty-six working days. That gives the familiar formula: gratuity = last drawn monthly salary × 15 × years of service ÷ 26. For example ₹50,000 × 15 × 10 ÷ 26 = ₹2,88,462. The calculator above shows this exact line of arithmetic for whatever you enter, so you can check it against your employer’s figure digit by digit.

None of those three: enter Basic pay plus dearness allowance (DA), which is what "wages" means for gratuity. House rent allowance, conveyance, overtime, bonus, employer PF contribution and reimbursements are left out. Use the LAST DRAWN monthly figure — the one on your final payslip — not an average across the year, because the Act fixes the rate at the wages last drawn. Two exceptions worth knowing: for a piece-rated employee the daily wage is averaged over the three months before termination, and if you are not covered by the Act your employer may compute on the average of your last ten months’ salary instead, in which case type that average into the salary box.

This is the single most argued question in gratuity, and it is genuinely unsettled. On the plain wording of the Act the six-month round-up in section 4(2) applies to service beyond the qualifying period, not to the five-year qualification itself — so four years and seven months is under five years and nothing is due. Against that, the Madras High Court in Mettur Beardsell Ltd. v. Regional Labour Commissioner read section 2A together with section 4(1) and held that an employee who works 240 days in the fifth year has completed a year of continuous service, making four years plus 240 days enough. Many employers follow that reading; it has not been settled for the whole country by the Supreme Court, so the outcome can depend on your employer and your jurisdiction. This calculator does not take sides: it computes on the service you enter and simply flags when that service is under five years.

Sources genuinely disagree here, and it is worth saying so plainly rather than pretending otherwise. For employees covered by the Act the rule is statutory and beyond argument: a part-year strictly in excess of six months counts as a full year. For employees outside the Act — where gratuity is contractual — some references apply the same round-up, while others credit only completed years and treat any part-year as ignored, because there is no statute to import the rule from. There is no single authority that settles it, since the answer really comes from the employer’s own scheme. Our "not covered" mode takes the narrower reading and credits completed years only, so it never overstates what you are owed. If your scheme document says otherwise, use the "covered" mode’s year count and substitute the 30-day divisor your scheme specifies.

The divisor 26 is written into the Act: a monthly wage is converted to a daily wage by treating the month as twenty-six working days, on the reasoning that four weekly days of rest are not working days. That is why covered employees get monthly salary ÷ 26 × 15 per year, which is a little over half a month’s pay. Where the Act does not apply, the widely used contractual convention is half a month’s salary per completed year — monthly salary ÷ 30 × 15 — because there is no statutory daily-wage rule to follow. On the same salary and service the 26-day basis is worth about 15% more than the 30-day basis, which is why the covered-versus-not-covered table above matters more than it looks.

The ceiling is ₹20,00,000. It was ₹10,00,000 until the Payment of Gratuity (Amendment) Act, 2018 removed the fixed figure from the Act and let the Central Government notify the limit; the ₹20 lakh figure was notified with effect from 29 March 2018. Anything the formula produces above that is capped for the purpose of the Act, and the calculator says so explicitly when it happens. An employer is free to pay more than the ceiling as an ex-gratia or contractual amount — the ceiling limits the statutory entitlement, not the employer’s generosity — but the excess loses the protection and the tax treatment that attach to gratuity under the Act.

For government employees gratuity received on retirement or death is fully exempt from income tax. For everyone else the exemption under section 10(10) is capped, and the cap now stands at ₹20,00,000 — importantly, that is a lifetime cumulative limit across all employers, not a fresh allowance at each job, and the exempt amount is the least of the notified ceiling, the gratuity actually received, and the amount the statutory formula produces. Anything above the exempt figure is taxed as salary income in the year of receipt. Tax rules change more often than the gratuity formula does, so treat this as orientation and confirm the current position for your own return.

No. The calculator runs on your own device — the arithmetic happens in the page itself, so your salary and your length of service never leave your device, are never uploaded, stored or logged, and are not visible to us. Once the page has loaded you can even switch off your connection and it will keep working.