Gratuity Calculator
Reviewed by Subir Kumar Debsharma, Tax, GST and ROC professional with 20+ years of experience.
Most gratuity calculators online quietly get one thing wrong: they use a single formula for everyone. Whether you get the ₹26 or ₹30 version depends on whether your employer is registered under the Payment of Gratuity Act, and the gap between the two is real money. This calculator handles both, rounds your part-year the way the law actually does, applies the ₹20 lakh cap, splits your gratuity into the tax-free and taxable parts, and reflects the new Labour Code rule for fixed-term staff. It's an educational estimate. For a figure you'll act on, a chartered accountant is the right person to confirm.
Basic plus dearness allowance only, per month. Not gross. If you're not covered by the Act, use the average of your last 10 months.
Completed years of service.
0 to 11.
Your gratuity (15/26 formula)
₹4,05,000
- Tax-free
- ₹4,05,000
- Taxable
- ₹0
- Years counted
- 12
- Per year (15 days' wages)
- ₹33,750
Covered employees use 15 days' wages per year, worked out as monthly salary divided by 26 (the average working days in a month). A part-year over 6 months counts as a full year, so 11 years 8 months becomes 12. Gratuity is calculated on basic plus dearness allowance only, never on your gross or CTC.
How does the gratuity calculator work?
Gratuity is a lump sum your employer pays you for long service, worked out as 15 days of your last basic pay for every year you worked. You enter your last drawn basic plus dearness allowance, your years and months of service, and a few details about your employer. The tool then picks the right formula, rounds your service correctly, and shows how much of the result is tax-free.
One input trips people up. The salary here is basic plus DA only. It leaves out HRA, bonus, overtime, and special allowances, because the law (Section 2(s)) defines gratuity wages that way. Enter your gross or CTC by mistake and the figure comes out far too high, which is a common error on payslips and in online tools alike.
Covered vs not covered: which formula applies to you?
An employer with 10 or more employees is covered by the Payment of Gratuity Act and uses a divisor of 26, while a smaller, non-covered employer uses 30, which produces a lower gratuity. The divisor is the difference. Covered employees divide the monthly wage by 26, the average working days in a month. Non-covered employees divide by 30, a full calendar month.
Two more differences catch people out. For covered staff, a part-year over 6 months rounds up to a full year. For non-covered staff, there is no rounding, and the salary is the average of your last 10 months, not your final month. Take the same person, ₹58,500 of basic plus DA over 11 years and 8 months:
| Case | Years counted | Formula | Gratuity |
|---|---|---|---|
| Covered (÷26) | 12 (8 months rounds up) | 58,500 × 15 × 12 ÷ 26 | ₹4,05,000 |
| Not covered (÷30) | 11 (no rounding) | 58,500 × 15 × 11 ÷ 30 | ₹3,21,750 |
That's a difference of ₹83,250 on the same salary and tenure, purely from which rules apply. Nearly every calculator online shows only the first row, so a non-covered employee walks away with a number that's too high by design.
Is gratuity taxable?
Gratuity is tax-free within limits set by Section 10(10) of the Income Tax Act, and the limit depends on who you work for. Government employees get their gratuity fully tax-free with no cap. Everyone else has a ₹20 lakh ceiling, applied as the least of three figures.
| Who you are | Tax exemption |
|---|---|
| Government employee | Fully exempt, no limit |
| Private, covered by the Act | Least of: the ÷26 formula, ₹20 lakh, or actual received |
| Private, not covered | Least of: the ÷30 formula, ₹20 lakh, or actual received |
The ₹20 lakh figure is both the statutory cap on gratuity under the Act and the tax-free ceiling, and it was raised from ₹10 lakh on 29 March 2018. A high earner shows why it matters. A ₹2.1 lakh basic plus DA over 30 years works out to about ₹36.3 lakh on the formula. Of that, ₹20 lakh is tax-free and the remaining ₹16.3 lakh is taxable, and your employer only pays that surplus if it chooses to.
What does the new Labour Code change for gratuity?
The Code on Social Security, in force from 21 November 2025, gives fixed-term employees pro-rata gratuity from one completed year, without the usual 5-year wait. So someone on an 18-month fixed contract now earns gratuity for those 18 months. The calculator's employment-type toggle applies this rule.
Two honest caveats matter here. First, this 1-year rule is for fixed-term employees only. Permanent staff still need 5 years, so the widely-repeated line that "everyone now qualifies in a year" is simply wrong. Second, the same Codes widen the definition of wages, so basic plus DA must be at least half of total pay, which lifts the gratuity base for anyone whose basic was kept low. State-level rules are still rolling out through 2026, so how fast this reaches your own gratuity depends on your state and employer.
What this calculator does not do
It estimates the standard gratuity from your inputs. It does not read your service record, so it can't confirm whether your years count as "continuous service" under the law, which has its own definition for breaks and leave. It treats the salary you enter as correct, so for a non-covered employee you must work out your own 10-month average first. It does not compute the 4-years-240-days eligibility edge case, which rests on a High Court ruling rather than the plain statute, so it flags that as a note instead. And it is general education, not tax or legal advice. For anything you'll file or claim, a chartered accountant is the right person to confirm.
Pair this calculator with the guide
Gratuity is one of the employer costs bundled into your CTC, so the gross vs net income guide shows where it sits between CTC and take-home. Because the new Labour Code lifts the gratuity base, our study on how the Labour Code changes take-home pay runs the same 50% wage rule across salary bands. And since gratuity and provident fund together make up most of your retirement money at work, the Employee Provident Fund guide covers the other half.
Frequently asked questions
How is gratuity calculated in India?
Gratuity for an employee covered by the Payment of Gratuity Act is your last drawn basic plus dearness allowance, multiplied by 15, multiplied by your years of service, divided by 26. The 26 stands for the average working days in a month, and the 15 is 15 days' wages for each year. On a basic plus DA of ₹58,500 with 11 years and 8 months of service, which rounds up to 12 years, the gratuity is ₹4,05,000. It's calculated on basic plus DA only, never on your gross salary or CTC.
What is the gratuity formula if my company is not covered by the Act?
If your employer is not covered by the Payment of Gratuity Act, gratuity uses a divisor of 30 instead of 26, and the salary is the average of your last 10 months of basic plus DA, not your last drawn month. Only fully completed years count, with no rounding of a part-year. So the same ₹58,500 salary over 11 years and 8 months gives ₹3,21,750 for a non-covered employee, versus ₹4,05,000 for a covered one. Most online calculators only offer the ÷26 version, which overstates the figure for non-covered staff.
Do more than 6 months count as a full year for gratuity?
For an employee covered by the Act, yes: a part-year of more than 6 months counts as a full extra year, while 6 months or less is dropped. So 11 years 7 months rounds up to 12 years, but 11 years 6 months stays at 11. The exact wording in Section 4 is 'part thereof in excess of six months.' For non-covered employees, there is no rounding at all, only whole completed years count, which is the detail nearly every calculator gets wrong.
Is gratuity taxable in India?
Gratuity is tax-free within limits set by Section 10(10) of the Income Tax Act, and how much depends on who you work for. A government employee's gratuity is fully exempt with no cap. For a private employee covered by the Act, the exemption is the least of the formula amount, ₹20 lakh, or the actual gratuity received. For a private non-covered employee it's the least of the ÷30 formula amount, ₹20 lakh, or the actual received. Anything your employer pays above the ₹20 lakh statutory cap is ex-gratia and fully taxable.
Can you get gratuity before completing 5 years?
A regular employee normally needs 5 years of continuous service to receive gratuity, with one long-standing exception: the 5-year rule is waived if the exit is due to death or disablement. The new Labour Code, in force from 21 November 2025, adds another: fixed-term employees now earn gratuity on a pro-rata basis from one completed year, without the 5-year requirement. A common myth is that everyone now qualifies in a year. That's not right, the 1-year rule applies only to fixed-term employees, not permanent staff.
What is the maximum gratuity you can receive?
The Payment of Gratuity Act caps the statutory gratuity at ₹20 lakh, a limit raised from ₹10 lakh on 29 March 2018. Your formula amount can work out higher, and some employers pay the extra voluntarily, but that surplus is ex-gratia and fully taxable. For example, a ₹2.1 lakh basic plus DA over 30 years gives a formula figure of about ₹36.3 lakh, of which ₹20 lakh is tax-free and the remaining ₹16.3 lakh is taxable. Government employees have no such cap and are fully exempt.
Sources
- Ministry of Labour and Employment, The Payment of Gratuity Act 1972 (Sections 2(s), 4), labour.gov.in
- Ministry of Labour and Employment, gratuity ceiling raised to ₹20 lakh, S.O. 1420(E), 29 March 2018, labour.gov.in
- Income Tax Department of India, Section 10(10), tax exemption on gratuity, incometax.gov.in
- Ministry of Labour and Employment, The Code on Social Security 2020 (Section 53, fixed-term gratuity), labour.gov.in