Free HR & Payroll Tools
Gratuity Calculator.
Calculate your gratuity amount online as per the Payment of Gratuity Act, 1972. Just enter your last drawn basic + DA and years of service.
Enter your details
Your estimated gratuity
₹0
Enter your details to calculate
Tax exemption is capped at ₹20,00,000 (lifetime) for employees covered under the Act. This is an estimate for guidance only.
How gratuity is calculated in India
Gratuity is a lump-sum benefit an employer pays an employee as a thank-you for long, continuous service. It is governed by the Payment of Gratuity Act, 1972, which applies to establishments with 10 or more employees. For employees covered under the Act, the calculation uses a 26-day month (the assumed number of working days), and only basic salary plus dearness allowance (DA) is counted — not your full gross salary.
An important rule is how the final year is counted: any service beyond six months is rounded up to a full year, while service of six months or less is dropped. So 7 years and 4 months counts as 7 years, but 7 years and 7 months counts as 8 years. For employees not covered under the Act, employers typically use a 30-day month and do not round up part-years.
Who is eligible for gratuity?
An employee becomes eligible after completing five years of continuous service with the same employer. The five-year condition is waived if service ends due to death or disablement. Gratuity is payable on resignation, retirement, superannuation or termination (other than for proven misconduct).
Is gratuity taxable?
For employees covered under the Act, gratuity is exempt from income tax up to a lifetime limit of ₹20,00,000. Anything above that limit is added to your income and taxed at your applicable slab. Government employees receive gratuity fully tax-free.
An example
Suppose your last drawn Basic + DA is ₹45,000 and you have worked 7 years and 4 months. Service rounds to 7 years, so gratuity = (15 × 45,000 × 7) ÷ 26 = ₹1,81,731 (approx), fully tax-exempt as it is under the ₹20 lakh limit.
Gratuity calculator — frequently asked questions
How is gratuity calculated in India?
For employees covered under the Payment of Gratuity Act, gratuity = (15 × last drawn salary × years of service) ÷ 26, where last drawn salary is basic pay plus dearness allowance. Any service beyond six months in the final year is rounded up to a full year.
What is the eligibility for gratuity?
An employee becomes eligible for gratuity after completing five years of continuous service with the same employer. The five-year rule is waived in case of death or disablement.
Is gratuity taxable in India?
Gratuity is tax-exempt up to a lifetime limit of ₹20,00,000 for employees covered under the Act. Any amount above this limit is taxable as per the employee's income-tax slab.
How many years of service are needed for gratuity?
Five years of continuous service are required. Because the final year rounds up after six months, an employee with four years and seven months is still not eligible, but five years and seven months counts as six years.
Which salary is used to calculate gratuity?
Only basic salary plus dearness allowance (DA) is used — not gross salary. Allowances such as HRA, bonus and reimbursements are excluded from the gratuity calculation.
Automate gratuity, PF, ESI & payroll with NUZN People
NUZN People is HR & payroll software for India that calculates gratuity, PF, ESI, professional tax and TDS automatically, generates Form 16 and payslips, and runs full & final settlement in one click.
Explore NUZN People →Disclaimer: This gratuity calculator provides an estimate for general guidance based on the Payment of Gratuity Act, 1972. Actual gratuity may vary depending on your employer's policy and the latest statutory rules. Please confirm figures with a qualified professional before relying on them.