Gratuity Calculator
Estimate your gratuity payout under the Payment of Gratuity Act — using the 15/26 formula, automatic year rounding and the exact tax-free portion. Works for private-sector employees.
Your gratuity
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Tax treatment
Tax-exempt
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Taxable
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Gratuity is tax-free up to ₹20,00,000 (lifetime limit) for non-government employees.
How this is calculated
15 × salary × years ÷ 26
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What is gratuity?
Gratuity is a lump-sum reward your employer pays you for long, continuous service — a “thank you” for sticking around. It becomes payable when you leave a job (by resignation, retirement, termination, death or disablement) after completing at least 5 yearsof continuous service. It is governed by the Payment of Gratuity Act, 1972.
The 15/26 gratuity formula
For employees covered by the Act, the gratuity calculation formula is:
Gratuity = (15 × last drawn salary × years of service) ÷ 26
Here 15 represents 15 days’ wages and 26 is the number of working days in a month. Your “last drawn salary” is Basic + DA only. For employees not covered by the Act, the divisor is 30 instead of 26, and only fully completed years count.
The 6-month rounding rule
For covered employees, any part of a year in excess of six months is rounded up to a full year. So 7 years 8 months counts as 8 years, while 7 years 5 months counts as 7 years. This tool applies the rule automatically and tells you which year count it used.
Is your gratuity taxable?
Government employees pay no tax on gratuity. For everyone else, gratuity is tax-free up to the least of the actual amount received, the formula amount, or the ₹20,00,000lifetime limit. If your gratuity crosses ₹20 lakh across your career, the excess is taxable as salary. Gratuity is one of the components bundled into your CTC.
Frequently asked questions
How is gratuity calculated?
For employees covered by the Payment of Gratuity Act, gratuity = (15 × last drawn monthly salary × years of service) ÷ 26. Last drawn salary means Basic + Dearness Allowance. The 15/26 represents 15 days’ wages for every completed year of service. For employees not covered by the Act, the divisor is 30 instead of 26.
What is the eligibility for gratuity?
You must complete at least 5 years of continuous service with the same employer. The 5-year condition is waived only in case of death or disablement. If you resign or are terminated before completing 5 years, no gratuity is payable.
Is gratuity taxable?
Gratuity received by government employees is fully tax-exempt. For other employees covered by the Act, gratuity is exempt up to the least of: the actual gratuity received, Rs 20,00,000 (lifetime limit), or the amount from the 15/26 formula. Anything above the exempt amount is taxable as salary income.
How are years of service rounded off?
For employees covered by the Act, any part of a year in excess of six months counts as a full year. So 10 years 7 months is treated as 11 years, but 10 years 6 months stays 10 years. For employees not covered by the Act, only fully completed years are counted — extra months are ignored.
What is the maximum gratuity payable?
Under the Payment of Gratuity Act, the maximum statutory gratuity is Rs 20,00,000. An employer may pay more as ex-gratia, but any amount above Rs 20,00,000 is fully taxable.
Which salary is used in the gratuity formula?
Your last drawn monthly salary, counting only Basic salary plus Dearness Allowance (DA). Allowances like HRA, bonus and special allowances are not included.
What is 15/26 in gratuity calculation?
The 15/26 in the gratuity formula means you earn 15 days’ wages for every completed year of service, and 26 is taken as the number of working days in a month. So (15 ÷ 26) of your last monthly salary (Basic + DA) is your gratuity for each year worked. Employees not covered by the Payment of Gratuity Act use 15/30 instead.
Is gratuity calculated on basic salary or gross salary?
Gratuity is calculated only on your last drawn Basic salary plus Dearness Allowance (DA) — not on gross salary or full CTC. HRA, bonus, PF, overtime and special allowances are excluded from the gratuity calculation.
How is gratuity calculated for private-sector employees?
Private-company employees covered by the Payment of Gratuity Act use the same formula — (15 × last drawn Basic + DA × years of service) ÷ 26 — after completing 5 years of continuous service. The payout is tax-free up to Rs 20,00,000. This calculator applies these private-sector rules automatically.
Can I calculate gratuity in Excel?
You can, using the formula =(15 * (Basic+DA) * Years) / 26, but you have to handle the 6-month year-rounding and the Rs 20 lakh tax exemption yourself. This online gratuity calculator does all of that for you instantly, so there is no Excel sheet to build or maintain.