What This Calculator Estimates
Gratuity in India is a statutory lump-sum benefit paid to employees under the Payment of Gratuity Act, typically after completing five or more years of continuous service with an employer, calculated using a formula based on last drawn salary and years of service. It's designed as a token of appreciation for long-term service and is separate from provident fund or pension benefits. Because the exact formula and eligibility can vary by employment type and any legislative updates, this calculator lets you plug in your own figures to estimate the payout rather than assuming a fixed universal formula.
How to Use This Calculator
- Enter the salary amount you want to use.
- Enter completed years of service.
- Click Estimate Gratuity.
- Review the estimated gratuity amount.
- Verify official rules before relying on the result.
Formula / Method Used
For employees covered under the Payment of Gratuity Act, 1972: Gratuity = (Last Drawn Basic + DA) × 15 × Completed Years of Service ÷ 26. Service periods over 6 months round up to the next full year. Minimum 5 years of continuous service is required (waived for death or disablement).
Worked Example
An employee with a last-drawn Basic + DA of ₹75,000 and 12 completed years of service: Gratuity = (75,000 × 15 × 12) ÷ 26 = ₹5,19,231.
Tax Exemption (2026)
For private-sector employees, gratuity is tax-exempt up to ₹20 lakh under Section 10(10) of the Income Tax Act — a lifetime cap across all employers, unchanged since March 2018. Government employees are fully exempt with no upper cap (a separate ₹25 lakh statutory ceiling applies to some categories). Any amount above your remaining lifetime exemption is taxed as salary income at your slab rate.
Official Sources
Payment of Gratuity Act, 1972 and Income Tax Act Section 10(10) — consult the Ministry of Labour & Employment or a tax professional for your specific situation.
Related Calculators
Salary Calculator India · Pension Calculator · Income Tax Calculator India
Tips for a More Accurate Estimate
- Use your basic salary plus dearness allowance, not gross salary, for a more accurate estimate.
- Confirm your exact years of service, including how partial years beyond six months are typically rounded up under the Act.
- Check whether your organization is covered under the Payment of Gratuity Act or has its own gratuity policy.
- Keep in mind the tax-exempt gratuity ceiling when estimating your net payout.
- For an authoritative figure, ask your HR or payroll department for the official calculation.
Frequently Asked Questions
How many years of service are needed to qualify for gratuity in India?
Generally, five years of continuous service with the same employer is required under the Payment of Gratuity Act, though there are some exceptions such as death or disablement.
What salary figure is used to calculate gratuity?
Typically the last drawn basic salary plus dearness allowance is used, not the full gross salary including all allowances.
Is there a maximum cap on gratuity payouts?
Yes, the Payment of Gratuity Act sets a statutory ceiling on tax-exempt gratuity, though employers can pay more at their discretion — check current limits with official sources.
Is gratuity taxable in India?
Gratuity received by government employees is generally fully exempt, while private-sector employees have exemptions up to a statutory limit, with amounts beyond that being taxable. Confirm current rules with a tax advisor.
Does this calculator use the exact statutory formula?
It provides a simplified estimate based on the inputs you provide. For an exact statutory calculation, refer to the Payment of Gratuity Act formula and your HR department.
Last updated: May 11, 2026