Gratuity Calculator

How Gratuity Calculator Works

The Gratuity Calculator helps you calculate the amount of gratuity you’re eligible for when leaving a company after completing at least 5 years of continuous service. It uses the formula prescribed under the Payment of Gratuity Act, 1972, ensuring accuracy and compliance with Indian labor law.

Gratuity Formula (for Employees Covered under the Act)

Gratuity = (15 × Last Drawn Salary × Years of Service) / 26

Where:
Last Drawn Salary = Basic Pay + Dearness Allowance (DA)
Years of Service = Completed years of continuous employment
26 = Average working days in a month
The number 15 represents 15 days’ wages for each year of service.

Formula (for Employees Not Covered under the Act)

Gratuity = (15 / 30 × Last Drawn Salary × Years of Service)

This is applicable to companies not bound by the Gratuity Act, and the gratuity amount is generally slightly lower.

Example 1: Employee Covered under the Act

Suppose Ravi worked at a company for 12 years with a last drawn salary of ₹60,000 (Basic + DA). His gratuity amount will be:

Gratuity = (15 × 60,000 × 12) / 26 = ₹4,15,385

So, Ravi is eligible for a gratuity of approximately ₹4.15 lakh after 12 years of service.

Example 2: Non-Covered Organization

If Priya worked for 10 years in a company not covered under the Act and her last drawn salary was ₹50,000, the calculation will be:

Gratuity = (15 / 30 × 50,000 × 10) = ₹2,50,000

Thus, she’ll receive ₹2.5 lakh as gratuity.

Tax Exemption Rules

Gratuity received by government employees is fully exempt from tax.
For non-government employees, gratuity is tax-free up to ₹20,00,000.
Any amount exceeding this limit is taxable as per the individual’s income tax slab.

Key Fields Explained

Last Drawn Salary: The final monthly basic salary + DA before resignation or retirement.
Years of Service: Total number of years the employee has worked continuously in the organization.
Covered Under Gratuity Act: Select “Yes” if your organization is legally bound under the Gratuity Act (i.e., employs 10 or more employees).

Why Use a Gratuity Calculator?

To understand the exact benefit amount you’ll receive after leaving your job.
To plan for your retirement corpus and future financial stability.
To compare benefits between multiple job offers or organizations.
To understand your tax-free component and financial planning opportunities.

The gratuity calculator gives an instant and accurate estimate, helping you plan your post-employment finances confidently. Use it whenever you change jobs or approach retirement to stay financially informed.