Gratuity Calculator
Calculate gratuity payable on retirement or resignation under the Payment of Gratuity Act, 1972. Free India gratuity calculator with 20 lakh tax free cap.
Gratuity is a lump sum payment from an employer to an employee on retirement, resignation or death, in recognition of long service. The Payment of Gratuity Act, 1972 makes it mandatory for organisations with 10 or more employees, after a minimum service period of five years (waived in case of death or disability). The gratuity calculator on this page tells you exactly how much you are entitled to, and how much of it is tax free under the 20 lakh lifetime cap.
Gratuity
Why use the Gratuity Calculator
Gratuity is often the second largest lump sum an employee receives at exit, after EPF. The amount can run into several lakh for long tenure employees, and the 20 lakh tax free limit applies cumulatively across your entire career. Most employees do not know what their gratuity will be at any point during their tenure, which means they cannot factor it into retirement planning or exit decisions. The calculator changes that.
Benefits at a glance
Payment of Gratuity Act formula
For employees covered by the Act, gratuity equals 15 times last drawn (basic plus DA) times years of service, divided by 26. The 26 represents working days in a month under the Act. The calculator applies this formula correctly with the year rounding rule.
Tax free limit handled
Up to 20 lakh of cumulative gratuity in your lifetime is tax free under Section 10(10). Anything above is taxable as salary income at slab rate. The calculator splits the gratuity into tax free and taxable portions automatically.
Year rounding rule
If your service in the final year is six months or more, the year is counted as a full year. Less than six months in the final year is dropped. The calculator applies this rounding rule, which materially affects the gratuity for employees on the boundary.
Useful at exit and at retirement
Run the calculator before resigning to know the gratuity payout, before retirement to factor it into your corpus planning, and before any structural change that affects your basic salary.
How to use the Gratuity Calculator
- 1
Enter your last drawn salary
Use monthly basic plus dearness allowance, not the full CTC. Gratuity is computed on basic plus DA only, even if your salary structure has many other components.
- 2
Enter years of service
Total continuous service with the same employer. If you served 8 years and 7 months, enter 8.5; the calculator's rounding rule will round this up to 9 years for the formula. If you served 8 years and 4 months, the year is dropped and 8 years are used.
- 3
Tick the Payment of Gratuity Act box
Most private sector employees with 10 plus colleagues are covered by the Act. Smaller establishments may not be, in which case gratuity is at the employer's discretion or under terms of employment, often using a 0.5 month per year formula.
- 4
Read gratuity payable and tax position
The calculator shows the gross gratuity, the tax free portion (capped at 20 lakh) and the taxable portion. If your career has involved earlier gratuity payouts, subtract those from the 20 lakh limit when interpreting the tax free figure.
Frequently asked questions
Who is eligible for gratuity in India?
Employees who have completed at least 5 years of continuous service with an organisation covered by the Payment of Gratuity Act, 1972 (typically those with 10 or more employees). The 5 year requirement is waived in case of death or disability of the employee, in which case gratuity is paid for whatever service period was completed.
What is the gratuity formula?
Under the Payment of Gratuity Act, gratuity equals 15 times last drawn salary (basic plus DA) times years of service, divided by 26. For employees not covered by the Act, the formula is typically 15 times last drawn salary times years of service, divided by 30, or half a month's salary per year. Tip: the 26 in the Act formula gives a slightly higher gratuity than the 30 used by some non Act employers.
Is gratuity tax free?
Yes, up to a cumulative lifetime limit of 20 lakh under Section 10(10). The exemption applies across all gratuity payouts you receive in your career, not per employer. Any amount beyond 20 lakh is taxed at slab rate as salary income. Government employees enjoy a fully tax free gratuity without the 20 lakh cap, with separate rules.
How is the year rounding rule applied?
If your service in the final year is six months or more, the year is counted as a full year for the formula. If less than six months, the year is dropped. So 8 years 5 months counts as 8 years, but 8 years 6 months counts as 9 years. The single month boundary can shift the gratuity by a meaningful amount, so be aware when timing an exit.
Can I get gratuity before completing 5 years?
Generally no, except in cases of death or permanent disability. Some employers offer ex gratia payments at the time of layoff or restructuring, which may include an amount equivalent to gratuity, but these are at the employer's discretion and outside the Act.
Is gratuity included in CTC?
Usually yes. Most Indian employers include the annual gratuity provision (basic divided by 12, multiplied by 4.81 percent, which is the actuarial cost) in your CTC. This means the gratuity is theoretically already paid for through your CTC, even though you receive it as a lump sum at exit.
Can my employer refuse to pay gratuity?
Only in cases of dismissal for moral turpitude or willful misconduct that caused damage or loss to the employer. In such cases, the employer can withhold gratuity to the extent of the damage. Apart from these specific exceptions, gratuity is a statutory right and must be paid within 30 days of becoming due.
Final word
Gratuity is a quiet but meaningful benefit for long tenure Indian employees. Run the calculator before any exit decision, especially if you are within a few months of completing a service year boundary, and again at retirement to factor the payout into your corpus planning. The 20 lakh tax free limit is generous but cumulative across your career, so plan accordingly if you have already crossed it through earlier payouts.
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