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Gratuity Calculator - Payment of Gratuity India 2025

Calculate your gratuity amount in months or years as per Payment of Gratuity Act, 1972. Free online gratuity calculator for private employees in India to understand eligibility, tax implications, and get accurate 15/26 gratuity calculation formula for retirement or job change.

₹

Fifty Thousand rupees

₹10K₹5L
years
0 years50 years

Tip: Stepper increments by 6 months (0.5 years) as it affects gratuity calculation

Gratuity Amount

₹3.17 L

Total Service Period
10 years 6 months

Gratuity Growth Over Service Years

See how your gratuity amount increases with additional years of service

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Gratuity Calculation Formula

Gratuity Calculation Formulas

Understand the mathematical formulas used to calculate gratuity benefits.

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

Example:

Last Drawn Salary: ₹50,000, Years of Service: 10 years

(50,000 × 15 × 10) ÷ 26
= ₹2,88,462

Variables:

Last Drawn Salary - Basic salary + DA at the time of leaving
Years of Service - Total years of continuous service
15 - Fixed multiplier as per Gratuity Act
26 - Number of working days in a month

Maximum Gratuity = ₹20,00,000 (Current limit)

Example:

Even if calculated gratuity exceeds ₹20L, maximum payable is ₹20L

Min(Calculated Gratuity, ₹20,00,000)
= ₹20,00,000

Variables:

₹20,00,000 - Maximum gratuity limit as per Gratuity Act

These formulas provide the mathematical foundation for the calculations. Actual results may vary based on rounding, compounding frequency, and specific lender policies.

In-Depth Guide to Gratuity Calculation

What is gratuity amount?

The gratuity amount is a lump sum payment made by an employer to an employee as a token of appreciation for the services rendered during their employment tenure. It is a significant component of the salary structure and a key retirement benefit. This amount is not paid as part of the monthly salary but is accumulated and paid out when an employee leaves the job after completing a minimum of 5 years of continuous service, or upon retirement, or in unfortunate events like death or disablement. The gratuity amount is calculated based on the last drawn salary and the number of years of service, serving as a financial reward for loyalty.

How is gratuity calculated for private sector employees?

When it comes to gratuity calculation for private sector employees, the process is governed by the Payment of Gratuity Act, 1972. If your organization employs 10 or more people, you are likely covered. The standard gratuity calculation formula used is quite specific: it takes your last drawn salary (Basic + DA) and multiplies it by 15 days for every completed year of service. This total is then divided by 26. This calculation of gratuity ensures that employees are rewarded for their long-term loyalty. For those in non-covered establishments, the formula changes slightly—dividing by 30 instead of 26. Using this free online gratuity calculator for private employees can help you instantly determine which category you fall into and what your final amount will be—whether you're in Bangalore, Mumbai, Delhi, or any other city.

What is the 15/26 rule in gratuity calculation?

You might often hear about the "15/26" rule when discussing how gratuity is calculated. This fraction is central to the gratuity formula. The number 15 represents half a month's salary (15 days), acknowledging that you earn a reward for every year worked. The number 26 represents the number of working days in a month, excluding Sundays. So, what is 15/26 in gratuity calculation? It is the factor that standardizes the gratuity amount calculation across different months. This unique gratuity percentage logic ensures fairness, giving you a slightly higher per-day value than if you simply divided by 30.

What is the maximum limit on gratuity?

As per the latest amendment to the Payment of Gratuity Act, the maximum tax-exempt gratuity limit has been increased to ₹20 Lakhs. This means that for most private sector employees, any gratuity received up to this amount is fully exempt from income tax. If the calculated gratuity exceeds ₹20 Lakhs, the employer may still pay the higher amount, but the portion exceeding ₹20 Lakhs will be treated as taxable income in the hands of the employee. This limit is crucial for high-income earners and those with long service tenures to consider for tax planning.

What is the gratuity calculation formula for government vs private employees?

While the gratuity calculator formula for private employees often revolves around the 15/26 rule, government employees have their own set of rules, often aligned with the 7th pay commission gratuity calculation formula. For central government employees, the gratuity calculation in India is tax-exempt without the standard limits that apply to the private sector. However, for the vast majority of the private workforce, knowing how to calculate gratuity amount involves understanding the cap of ₹20 Lakhs. Whether you are looking for a retirement gratuity calculation formula or just checking your eligibility, understanding these distinctions is key to accurate financial planning.

How do we know we have reached the maximum limit?

The maximum limit of ₹20 Lakhs is a statutory cap set by the government. When you use a gratuity calculator formula, if the result exceeds ₹20,00,000, the amount payable under the Act is restricted to this cap. Employers can choose to pay more than this limit as an ex-gratia or performance bonus, but the tax exemption under Section 10(10) is strictly limited to ₹20 Lakhs. If your calculated gratuity crosses this threshold, any excess amount received will be added to your taxable income and taxed as per your income tax slab. This is a critical aspect of gratuity calculation in India for high-income earners.

What is Dearness Allowance (DA) and why is it relevant?

Dearness Allowance (DA) is a cost-of-living adjustment allowance paid to government employees, public sector employees, and pensioners in India. In the context of gratuity calculation, "wages" includes your basic salary plus DA. It does not include HRA, special allowances, or bonuses. Since DA is directly linked to inflation, it ensures that your gratuity amount reflects the real value of your earnings over time. When using a free online gratuity calculator for private employees, always ensure you input the sum of Basic + DA to get the correct gratuity amount calculation.

Taxable Gratuity Calculator - Tax Implications in India

Government Employees

  • Full Exemption: For employees of Central Government, State Government, and local authorities, the entire gratuity amount is fully exempt from tax under Section 10(10)(i).
  • No Limit: There is no monetary ceiling (like ₹20 Lakhs) for this exemption category.

Private Sector Employees (Covered under Act)

For employees covered by the Payment of Gratuity Act, 1972, the tax exemption is the least of the following three:

  • Actual Gratuity Received: The total amount paid by the employer.
  • Statutory Limit: ₹20,00,000 (Twenty Lakhs).
  • Formula Calculation: (15 days' salary) × (Completed years of service). Salary = Last drawn Basic + DA.

Private Sector Employees (Not Covered under Act)

For those not covered by the Act, the exemption is the least of:

  • Actual Gratuity Received: The amount paid by the employer.
  • Statutory Limit: ₹20,00,000 (Twenty Lakhs).
  • Half-Month Average: (Average salary of last 10 months) × ½ × (Completed years of service).

How to claim gratuity, documents and nomination

Steps to claim (no separate account needed)

  1. Submit Form I to employer within 30 days of becoming eligible (resignation/retirement).
  2. Provide bank details for NEFT and address/ID proof.
  3. Employer issues calculation and pays within 30 days; interest applies for delay.

Documents required

  • Form I (or Form J/K for nominees/legal heirs).
  • Relieving/retirement order, last salary slip, service certificate.
  • Identity/address proof and cancelled cheque.
  • In case of death: death certificate and proof of relationship.

Nominations and after demise

File nomination using Form F with your employer and update it after marriage or status changes. If the employee dies, payment goes to the nominee; if no nominee is recorded, legal heirs receive it on submission of required proofs/certificates. Interest is payable for delays.

Withdrawal terms & conditions

Gratuity is payable on resignation, retirement, death or permanent disablement. It is generally not withdrawable while in service. Misconduct causing financial loss may lead to partial/complete forfeiture after due process.

Essential Gratuity Information for Indian Employees

Important facts about gratuity calculation and eligibility

5 Years Minimum Service

Gratuity is payable only after completing 5 years of continuous service. However, in case of death or disablement, this condition is waived.

Know the Formula

For covered establishments: (Last Salary × 15 × Years) ÷ 26. For non-covered: (Last Salary × 15 × Years) ÷ 30. Maximum limit is ₹20 lakhs.

Tax Exemption Benefits

Gratuity up to ₹20 lakhs is tax-free for private employees. Government employees enjoy complete tax exemption on gratuity amount.

Payment Timeline

Gratuity must be paid within 30 days of becoming due. Delay beyond this attracts interest at 10% per annum on the unpaid amount.

Payment of Gratuity Act, 1972 - Key Provisions

Understanding the legal framework governing gratuity payments in India

Eligibility Criteria

Service Requirement

• Minimum 5 years continuous service
• Exception: Death/disablement during service
• Resignation before 5 years = No gratuity

Establishment Coverage

• Factories with 10+ workers
• Mines, oil fields, plantations
• Ports, railways, companies
• Educational/medical institutions

Calculation & Limits

Formula

(Last Salary × 15 × Years of Service) ÷ 26

Maximum Limit

₹20,00,000 (Twenty Lakhs) - Amended in 2018

Salary Components

Basic + DA + Commission (if any)

Who should use this gratuity calculator?

Retiring Employees

Calculate your final gratuity payout before retirement.

Job Changers

Check eligibility and amount after 5+ years of service.

HR & Payroll

Validate calculations using the 15/26 formula.

Nominees

Estimate claim amount in case of employee demise.

Frequently Asked Questions about Gratuity

Common questions about gratuity calculation, eligibility, and payment

What is gratuity and who is eligible for it?

Gratuity is a lump sum payment made by employer to employee for services rendered. Employees who complete 5 years of continuous service are eligible. It's applicable to establishments with 10 or more employees under the Payment of Gratuity Act, 1972.

What is 15 26 in gratuity calculation?

The 15/26 in gratuity calculation is the formula used for establishments covered under the Payment of Gratuity Act. The number 15 represents 15 days of salary for each completed year of service, and 26 represents the average working days in a month (excluding Sundays). The formula is: (Last Salary × 15 × Years of Service) ÷ 26. For non-covered establishments, 30 is used instead of 26.

How is gratuity calculated for private employees?

For private employees in establishments covered under Gratuity Act: (Last drawn salary × 15 × completed years of service) ÷ 26. For non-covered establishments: (Last drawn salary × 15 × completed years) ÷ 30. Last salary includes basic + DA. Maximum limit is ₹20 lakhs. Use our gratuity calculator online to get instant accurate results.

How to calculate gratuity amount step by step?

Step 1: Identify your last drawn monthly salary (Basic + DA). Step 2: Count total completed years of service (6+ months counts as 1 year). Step 3: Check if your company is covered under the Act (use 26) or not (use 30). Step 4: Apply formula: (Last Salary × 15 × Years) ÷ 26 (or 30). Step 5: If result exceeds ₹20 lakhs, maximum payable is ₹20 lakhs. Our gratuity calculator for private employees does this automatically.

What salary components are considered for gratuity calculation?

Gratuity calculation includes basic salary plus dearness allowance. Commission based on a fixed percentage of turnover is also included. HRA, overtime, bonus, and other allowances are excluded from the calculation.

Is gratuity taxable? What are the tax implications?

For private sector employees, gratuity up to ₹20 lakhs is tax-exempt. Any amount above ₹20 lakhs is taxable as salary income. Government employees receive complete tax exemption on gratuity amount under Section 10(10) of Income Tax Act.

What is the 7th pay commission gratuity calculation formula?

Under the 7th Pay Commission, government employees receive gratuity calculated as: (Last drawn basic pay + DA) × completed years of service × 1/4. There's no maximum limit for central government employees. State government employees may have different limits. The gratuity amount is completely tax-exempt for government employees.

When can gratuity be forfeited by the employer?

Gratuity can be wholly or partially forfeited if employee is terminated for misconduct causing financial loss to employer. However, forfeiture requires proper inquiry and the employee must be given opportunity to defend. Normal resignation or retrenchment doesn't lead to forfeiture.

What if I change jobs before completing 5 years?

If you resign before completing 5 years, you're not entitled to gratuity. However, if termination is due to death, disablement, or layoff, gratuity becomes payable even before 5 years. Some employers voluntarily pay gratuity for shorter service periods.

How are part years calculated in gratuity?

Any part of a year exceeding 6 months is treated as one full year for gratuity calculation. For example, 10 years 8 months of service is considered as 11 years. Less than 6 months is ignored in the calculation.

Is the gratuity calculator bangalore different from other cities?

No, the gratuity calculation formula remains the same across India—whether you're in Bangalore, Mumbai, Delhi, or any other city. The Payment of Gratuity Act, 1972 is a central law that applies uniformly throughout India. Our gratuity calculator online works for all Indian cities and follows the standard 15/26 formula for covered establishments.

Will I get gratuity for 4.8 years of service?

Yes, you can get gratuity for 4.8 years of service due to the rounding provision in the Payment of Gratuity Act. Any service period exceeding 6 months in a year is rounded up to a full year. Since 4 years 8 months exceeds the 6-month threshold (4 years 6 months), it is treated as 5 completed years, making you eligible for gratuity. Similarly, 4 years 5 months would only count as 4 years and you wouldn't be eligible. This rounding rule applies only to calculating years of service, not to the minimum 5-year eligibility if you haven't completed at least 4 years 6 months.

How to calculate gratuity in months?

To calculate gratuity in months, first convert your total service period into years using the rounding rule: any period exceeding 6 months counts as 1 full year. For example, if you've worked for 7 years and 9 months, count it as 8 years. Then apply the standard formula: (Last Salary × 15 × 8) ÷ 26 for covered establishments. Our gratuity calculator in months automatically handles this conversion—simply input your years and remaining months, and it will calculate the correct gratuity amount following the 6-month rounding provision of the Gratuity Act.

What is the difference between NPS and gratuity?

NPS (National Pension System) and gratuity are both retirement benefits but serve different purposes. Gratuity is a one-time lump sum payment made by your employer after 5 years of service, calculated as (Last Salary × 15 × Years) ÷ 26, with no employee contribution required. NPS is a voluntary retirement savings scheme where both you and your employer contribute regularly to build a retirement corpus, which is partially withdrawn as lump sum and partially used to purchase an annuity. Gratuity is mandatory under the Payment of Gratuity Act for eligible establishments, while NPS is optional. You can receive both benefits—they complement each other for comprehensive retirement planning. Use our gratuity calculator to estimate your gratuity, and an NPS calculator separately for pension planning.