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Gratuity Calculator (Payment of Gratuity Act)

Work out your statutory gratuity payout upon retirement, resignation, or superannuation. Applies the 15/26 statutory formula, service tenure rounding rules, and Section 10(10) tax exemptions.

For a last-drawn basic salary of ₹80,000 and 10 years 7 months of service (rounded to 11 effective years), the payable gratuity is ₹5,07,692, which is 100% tax-free under Section 10(10).

Employment & Salary Details

Calculate statutory gratuity payout under the Payment of Gratuity Act, 1972 and Section 10(10) tax exemptions.

₹

Your basic pay + dearness allowance (DA) received in your last month of service.

years

Full 12-month periods completed.

months

If > 6 months, rounds up to 1 full year for covered employees.

Total Gratuity Payable

₹5,07,692

Based on 11 effective years of service

Tax-Exempt Gratuity

₹5,07,692

100% tax-free under Section 10(10)

Taxable Gratuity

₹0

₹0 (Fully within ₹20L exemption limit)

Effective Tenure for Calculation

11 Years

10 yrs 7 mos rounded up to 11 yrs

Statutory Calculation Mechanics

Statutory Formula:

(15 × ₹80,000 × 11 years) ÷ 26 working days
  • 26 working days factor: Gratuity assumes 26 working days per month (excluding 4 Sundays), making 15 days pay equal to 15 ÷ 26 of basic salary.
  • Tenure rounding rule: In establishments covered by the Act, any service period exceeding 6 months in the final year is legally treated as one full year.
  • Statutory cap: Under Section 10(10), the maximum tax-free gratuity is capped at ₹20,00,000 (Twenty Lakh Rupees).

Gratuity Payable

₹5,07,692

Tax-exempt: ₹5,07,692 (11 years tenure)
Gratuity provisions apply to factories, mines, oilfields, plantations, ports, railway companies, and commercial establishments employing 10 or more persons on any day in the preceding 12 months.
What it is:
A statutory terminal benefit calculator based on the Payment of Gratuity Act, 1972.
What it calculates:
Total gratuity payable, tax-exempt amount under Section 10(10), taxable gratuity, and effective service years.

Key Assumptions

  • 15 working days wages for each year of service on a 26-day month basis.
  • Tenure rounding: >6 months rounded up to next full year for covered establishments.
  • Statutory tax exemption cap of ₹20,00,000.
  • Minimum continuous service requirement of 5 years.

How it works

Under the Payment of Gratuity Act, 1972, gratuity is a statutory retirement benefit paid by employers to employees who complete at least 5 years of continuous service.

For employees covered under the Act, the formula is: (15 × Last Drawn Basic Salary × Completed Years of Service) ÷ 26. The 26 represents working days in a month excluding 4 Sundays.

Tenure Rounding: Any service period exceeding 6 months in the final year of employment is rounded up to the next full year (e.g., 7 years 7 months counts as 8 years).

Tax Exemption: Under Section 10(10) of the Income Tax Act, gratuity received by private sector employees is tax-exempt up to a statutory ceiling of ₹20,00,000.

Formula

Gratuity (Covered) = (15 x Last Drawn Basic x Tenure in Years) / 26; Gratuity (Non-covered) = (15 x Average Basic x Tenure in Years) / 30

Last Drawn Basic
= Basic Salary + Dearness Allowance received in final month
15
= Fifteen days' wages for each completed year of service
26
= Standard working days per month (excluding weekly offs)
Tenure
= Effective completed years of service (>6 months rounded up for covered staff)

The statutory tax exemption ceiling under Section 10(10) is ₹20 Lakhs as notified by the Ministry of Labour and Employment.

Example calculation

Basic ₹80,000 & 10 Years 7 Months Service (Covered Establishment)

Last Drawn Monthly Basic (+ DA)
₹80,000
Effective Rounded Service Tenure
11 Years (>6 months rounded up)
Gratuity Formula
(15 × Last Basic × Tenure) ÷ 26
Total Gratuity Payable
₹5,07,692
Tax-Exempt Gratuity (Section 10(10))
₹5,07,692
Taxable Gratuity
₹0

Frequently asked questions

What is the minimum service period required to receive gratuity?
Under Section 4(1) of the Act, an employee must complete at least 5 continuous years of service with the employer. The only exceptions where the 5-year rule is waived are employee demise or permanent disablement due to accident or disease.
How does the 6-month rounding rule work?
For establishments covered under the Act, if your service in the final year exceeds 6 months, it is rounded up to the nearest whole year. For example, 10 years and 7 months is calculated as 11 years. If the final fraction is 6 months or less, it is rounded down.
Is gratuity taxable in India?
Gratuity received by government employees is 100% tax-free. For private sector employees covered under the Act, gratuity is tax-free up to ₹20,00,000 under Section 10(10). Any amount received above ₹20 Lakhs is added to taxable salary and taxed at your regular slab rate.
Can an employer pay more gratuity than the statutory formula?
Yes. Employers are free to pay gratuity exceeding the statutory formula under company policy or employment contracts. However, the tax exemption remains strictly capped at ₹20 Lakhs.

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Reviewed by Pradipta Ray, Editor · Updated