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Gratuity Calculator
What you are owed when you leave, under the Payment of Gratuity Act formula.
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Gratuity is a statutory payment for completing five years with one employer. It is calculated on your last drawn basic plus DA, not on CTC and not on your average salary over the years.
The formula
For employers covered by the Act — ten or more employees — it is 15 days of pay for every completed year, counted on a 26-day month: 15 × last drawn salary × years ÷ 26. A part-year of six months or more rounds up to a full year. Employers outside the Act use a 30-day month and do not round up.
The five-year rule and its exceptions
Five continuous years is the threshold, but it does not apply where service ends because of death or disablement. Courts have also held that 4 years and 240 days counts as five in establishments working a five-day week.
Tax
For private-sector employees the exemption is ₹20 lakh across your whole working life, not per employer. Government employees receive gratuity fully exempt.
Frequently asked questions
Who is eligible for gratuity?
Any employee who completes five continuous years with an establishment covered by the Payment of Gratuity Act — broadly, one with ten or more employees. The five-year condition does not apply where service ends because of death or permanent disablement.
Is 4 years and 8 months treated as five years?
In establishments working a five-day week, courts have held that 4 years and 190 days qualifies; for a six-day week the figure is 4 years and 240 days. Employers do not always apply this automatically, so it is worth raising if you are close.
How much gratuity is tax-free?
For private-sector employees, up to ₹20 lakh across your entire working life, not per employer. Anything above that is taxable as salary. Government employees receive gratuity fully exempt.
Is gratuity calculated on CTC or basic salary?
On last drawn basic plus dearness allowance only — not on CTC, not on gross salary, and not on an average of past years. That is why the figure is usually smaller than people expect.