Gratuity calculator

Gratuity is a lump sum your employer owes you when you leave after enough years of continuous service — a legal entitlement under the Payment of Gratuity Act, not a discretionary bonus. The formula is fixed: 15 days of your last drawn basic salary (plus dearness allowance, if your employer pays it) for every year you worked, using a 26-day working month as the basis.

The eligibility threshold

You need at least 5 years of continuous service for gratuity to apply at all — leave at 4 years and 11 months, and the standard rule gives you nothing, however unfair that can feel one month short of the line. Continuity matters too: an authorized leave of absence doesn't break service, but a genuine gap in employment can.

The 6-month rounding rule

Years of service rarely land on a clean number, so the Act has a specific rule for the final, partial year: if it's more than 6 months, it rounds up to a full year; if it's 6 months or less, it's dropped. Someone leaving at 12 years and 7 months is treated as 13 years for this calculation; someone at 12 years and 5 months is treated as 12. That single month either side of the 6-month mark can be worth a full extra year of gratuity, which is exactly why it's worth checking precisely where your own service period falls before you plan an exit date.

Why the number isn't quite half a month's pay

The 15/26 fraction in the formula comes from treating a working month as 26 days rather than 30 — the law's assumption is 4 Sundays off per month, not a full calendar month. Multiply that out and gratuity works out to slightly more than half your monthly basic salary for every year served, not exactly half, which is a common rounding people do in their heads that undershoots the real figure slightly.

The tax-free ceiling

For most private-sector employees, gratuity is exempt from tax up to ₹20,00,000 — a lifetime limit that applies across every employer you've ever worked for, not per job. Anything your gratuity payout exceeds that ceiling by is taxed as regular income in the year you receive it. At most salary levels this ceiling never comes into play, since 5-15 years of service rarely produces a gratuity payout anywhere near ₹20,00,000 — it becomes relevant mainly for very long tenures at a high basic salary. Government employees don't face this ceiling at all; their gratuity is fully exempt regardless of amount.

What this calculator can't tell you

It assumes a clean, continuous stretch of service at a single employer with one final basic salary figure. It doesn't model a break in service, a transfer between group companies that your employer treats as continuous for gratuity purposes, or a settlement that includes gratuity bundled with other severance pay. If your situation involves any of those, treat this as an estimate of the standard formula rather than your exact final number — HR or a labour law professional can confirm how your specific case is treated.

Why this rarely shows up on a monthly payslip

Unlike provident fund, gratuity isn't deducted from your salary month to month — it's an obligation your employer accrues and pays out only when you actually leave. Some CTC breakdowns include a "gratuity provision" as a line item to show the full cost of employing you, which is exactly what the provision represents on this site's CTC-to-in-hand calculator, but it's an accounting figure, not money you receive or lose access to each month. It only becomes real, payable money at the point you actually leave, which is what this calculator is estimating.