Payment of Gratuity Act, 1972

Gratuity Calculator

Gratuity is a lump sum an employer pays for continuous service. Enter your last drawn Basic + DA and how long you have worked to see the amount, and exactly how it was arrived at.

Gratuity payable₹2,01,9237.00 years of service, counted as 7
Basic + DA₹50,000
Days of wages per year15
Years counted(final part-year ignored)7
Divisor(working days in a month)26
Gratuity₹2,01,923

How it is calculated

The Payment of Gratuity Act, 1972 sets one formula: gratuity = (last drawn Basic + DA) × 15 × completed years ÷ 26. The 26 is the number of working days the Act assumes in a month, and 15 is the days of wages earned for each completed year of service.

Two rules decide the number of years. Eligibility needs five years of continuous service, judged on your actual service — 4 years 8 months does not qualify, even though it rounds to 5. For the amount, more than six months in the final year counts as a full year, so 7 years 7 months is calculated as 8.

The result is capped at ₹20,00,000. An employer may pay more, but the excess is ex-gratia rather than statutory gratuity and is taxed accordingly.

This calculator uses the statutory divisor of 26 and the 5-year minimum. Seasonal establishments use a divisor of 30, and some employers voluntarily use a lower minimum — in Payroll Bharat both are configurable per company.

Frequently asked questions

What is the gratuity formula in India?
Gratuity = (last drawn Basic + DA) × 15 × years of service ÷ 26. The 26 is the number of working days in a month, and 15 represents 15 days of wages for each completed year.
How many years do I need to be eligible for gratuity?
Five years of continuous service. The one exception in the Act is death or disablement, where gratuity is payable regardless of length of service.
Is a year of 5 years 7 months counted as 6 years?
Yes. More than six months in the final year is counted as a full year, so 5 years 7 months is calculated as 6. But 5 years 5 months stays 5.
What is the maximum gratuity payable?
₹20,00,000. Anything an employer pays above that is ex-gratia rather than statutory gratuity, and is taxed differently.
Is gratuity taxable?
For employees covered by the Act, gratuity up to ₹20 lakh is exempt from income tax. Amounts above the exemption are taxed as salary income.
Does DA count towards gratuity?
Yes. The formula uses Basic + Dearness Allowance. Other allowances such as HRA and conveyance are excluded.

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