Gratuity Calculator

What is Gratuity and When Can You Claim It?

Gratuity is a statutory benefit — your employer is legally required to pay it. Governed by the Payment of Gratuity Act, 1972, it applies to any organisation with 10 or more employees. You become eligible after completing 5 continuous years of service with the same employer. It is paid on retirement, resignation, termination (except for proven misconduct), death or permanent disablement. This is not a voluntary bonus — it is your right.

The Two Formulas — and Why They Give Different Answers

If your employer is covered under the Gratuity Act: Gratuity = (Basic + DA) × 15/26 × Years. The 26 represents working days per month (excluding Sundays). If your employer is not covered: Gratuity = (Basic + DA) × 15/30 × Years. The 30 represents calendar days. Covered employees always get a higher payout for the same salary and years — the denominator is smaller (26 vs 30). Not sure which applies? If your company has more than 10 employees and you have been there 5+ years, it is almost certainly covered.

Tax Rules — Up to ₹20 Lakh is Tax-Free

Private sector employees: gratuity up to ₹20 lakh is fully exempt from income tax under Section 10(10). Any amount above ₹20 lakh is taxable as income in the year of receipt — at your applicable slab rate. Government employees have no upper limit; their entire gratuity is tax-free. If you expect your gratuity to cross ₹20 lakh, consider planning your exit in a year where your other income is lower to reduce the tax impact. Use our Income Tax Calculator to estimate the actual liability.

Calculation Examples — What You Will Actually Receive

Example A — Mid-level professional (covered): Basic ₹60,000/month, 12 years of service. Gratuity = 60,000 × 15 × 12 / 26 = ₹4,15,385. Fully tax-free. Example B — Senior professional (covered): Basic ₹1,20,000/month, 25 years. Gratuity = 1,20,000 × 15 × 25 / 26 = ₹17,30,769. Fully tax-free. Example C (crosses ₹20L limit): Basic ₹1,50,000/month, 30 years. Gratuity = ₹25,96,154. Tax-free portion: ₹20 lakh. Taxable: ₹5,96,154.

Three Things Employees Often Get Wrong About Gratuity

First: Only Basic + DA counts — HRA, travel allowance, performance bonuses and other allowances are excluded. Many employees overestimate their gratuity by calculating on full CTC. Second: Leaving 2 months before completing a year loses that full year's gratuity — if you have served 9 years and 7 months, you get 10 years' gratuity; 9 years and 4 months gets you only 9 years. Third: Nomination is not optional — always submit a gratuity nomination form to your employer. Without it, family members have to go through a lengthy legal process to claim the amount after death. Also compare your salary structure using our HRA Calculator.

✓Verified by ToollyX Team · Last updated June 2026