Gratuity Calculator

Gratuity under the Payment of Gratuity Act is payable only after five years of continuous service with the same employer, on leaving the job — resignation, retirement or termination. The five-year condition is waived when the employment ends due to the employee's death or disablement, in which case gratuity is payable to the employee or their nominee regardless of tenure.

For employees covered by the Payment of Gratuity Act, gratuity is (15 × last drawn monthly salary × years of service) ÷ 26, where salary means basic plus dearness allowance. It amounts to fifteen days' wages for every completed year of service, using a 26-working-day month. For example, a ₹50,000 monthly basic+DA and 10 years of service gives 15 × 50,000 × 10 ÷ 26 ≈ ₹2.88 lakh. The statutory amount is capped at ₹20 lakh.

The statutory ceiling under the Payment of Gratuity Act is ₹20 lakh, a limit set in 2018 and unchanged since. If the formula produces more — which happens at high salaries with long service, for instance ₹1.2 lakh monthly basic+DA over 30 years computes to about ₹20.8 lakh — the entitlement is capped at ₹20 lakh. Employers may pay above the cap voluntarily, but that excess is outside the Act's entitlement.

The Act's rounding rule — service beyond six months in the final year counts as a full year — applies to computing the amount, not to the five-year eligibility gate, so the safe reading is that 4 years 8 months does not qualify. Some High Court rulings have accepted 4 years and 240 days in the fifth year as qualifying, but this is not uniformly settled; five completed years is the clear statutory threshold.

For government employees, gratuity is fully exempt from income tax. For private-sector employees covered by the Payment of Gratuity Act, the exemption is the least of the actual gratuity received, the amount the statutory formula produces, and ₹20 lakh — a lifetime limit across employers. Any gratuity received beyond the exempt amount is taxed as salary income in the year of receipt.