Gratuity Calculator

Estimate gratuity under the Payment of Gratuity Act (India)

Gratuity is an end-of-service benefit in India intended to reward long, continuous employment. When an employer is covered by the Payment of Gratuity Act, 1972, a common calculation uses your last drawn basic salary + dearness allowance (DA) and your completed years of service. This calculator helps you estimate the payout so you can plan for resignation, retirement, or a job transition.

Different organizations interpret “salary”, “continuous service”, rounding rules, and caps in slightly different ways, and the law itself can change. Treat this page as an estimation tool and a learning resource—not legal advice. If you expect a large gratuity amount or have an unusual service history (breaks, transfers, contract changes), verify details with HR or a qualified professional.

Core formula

For Act-covered establishments, an often-cited formula is:

Here is gratuity, is last drawn monthly basic+DA, and is eligible years of service. The factor 15 reflects “15 days’ wages” per completed year, while 26 approximates working days in a month. Many quick estimates use this structure because it is easy to audit: if your salary doubles, the gratuity estimate doubles; if your service years increase, the estimate increases proportionally.

How the calculator rounds service years

In practice, partial years matter. A commonly used rounding convention is:

• If you have 6 months or more in the last incomplete year, it is treated as an additional full year.
• If you have less than 6 months, it is not treated as an additional year.

This is why the form asks for “Years of service” plus “Additional months”. The calculator uses that rounding approach to compute the effective service-year count.

Act coverage vs. alternate estimates

Some organizations, policies, or simplified planning scenarios use a 30-day divisor instead of 26. The goal is not to “pick a winner”, but to let you compare assumptions. If you are unsure which convention your employer uses, calculate both and treat the spread as an uncertainty band while you confirm your official HR policy.

Planning guidance

Gratuity is frequently paid as a lump sum, so it behaves like a liquidity event: it can stabilize your finances during a transition, cover relocation expenses, or accelerate debt repayment. It can also have tax implications that depend on employer type, statutory limits, and current law. If your estimate is large, do a quick “net after tax” scenario so you are not surprised at settlement time.

A practical approach is to decide in advance where the money should go: (1) a 6–12 month emergency buffer, (2) high-interest debt payoff, and (3) long-term savings or a diversified investment portfolio. This helps you treat gratuity as part of a bigger financial plan rather than a windfall.

Eligibility and “continuous service” (plain-English overview)

Many employees first encounter gratuity when they are close to leaving a job. At that point, the two most common questions are “Am I eligible?” and “How many years count?” Eligibility is often framed as completing a minimum period of continuous service (commonly described as five years), but continuous service has nuance. Approved leave, sickness, certain types of layoffs, or other interruptions may still be treated as continuous depending on the facts and the applicable rules.

For planning, the key is to think in terms of the employer’s record of service and any documented breaks. If you have a complicated employment history—role changes, transfers between units, periods of unpaid leave, or a switch from contract to permanent—collect documentation early. Even if the final payable amount is straightforward, having the timeline and letters ready reduces settlement friction.

Rounding scenarios you can sanity-check

The “months” field exists to model the common “6 months or more counts as one additional year” behavior. Here are a few examples to build intuition:

Caps, limits, and why your computed amount may differ

The formula produces a mathematical estimate, but actual payable gratuity can be affected by statutory caps or employer-specific policies. If your computed amount is high, look for two “reality checks”: (1) whether a cap applies to your situation, and (2) whether the employer uses the same definition of salary components you entered (basic+DA vs. a broader number). These differences explain most “the calculator doesn’t match HR” outcomes.

Tax planning (high level)

Gratuity receipts can be fully or partially exempt depending on employer type and rules in force at the time of payment. If you are close to exemption limits, timing and documentation can matter. A conservative planning approach is to assume some portion could be taxable, then adjust once you confirm the category and limit that applies to you. If you are planning a resignation date, comparing scenarios can be worthwhile—especially when a few months changes the service-year rounding and therefore the gross amount.

Settlement checklist

When you are actually leaving, the fastest way to avoid delays is to treat gratuity as one line item in a broader final-settlement package. Consider gathering:

• Appointment letter and any promotion/role-change letters.
• Recent payslips showing basic+DA and salary revisions.
• Documentation for approved leaves or any service interruptions.
• Nomination forms (especially relevant for family/beneficiary handling).

With these in hand, you can reconcile eligibility dates, service years, and the salary base used for calculation.

Frequently asked questions

Does this include bonuses or allowances? Typically no; many calculations use basic+DA, but always confirm your employer’s policy.

Why does selecting 30 days change the result? A larger divisor reduces the per-year amount. Some estimates use calendar days rather than working days.

What if the calculator shows an amount higher than expected? Check whether you used the correct salary base and whether a statutory cap applies.

Can the result be negative? No. Gratuity is a benefit amount, so the calculator returns a non-negative estimate.

Employer timelines and disputes (what to do if something feels off)

In many organizations, gratuity is processed as part of final settlement along with last salary, leave encashment, reimbursements, and any other dues. If you see unexpected delays, the fastest first step is usually administrative: confirm that your resignation/relieving date is recorded correctly, that your bank details are on file, and that the settlement workflow has the required approvals. Small paperwork issues can look like “policy problems” until they are surfaced.

If the amount appears wrong, ask for the calculation basis in writing: the salary base used, the effective service years, and whether any cap was applied. Once you have those numbers, you can usually reconcile the difference quickly by comparing them to your own records. Having a transparent formula makes this conversation easier because you are discussing inputs rather than debating outcomes.

If you still cannot resolve the discrepancy, you may need to escalate through HR, payroll, or the appropriate authority for your situation. This page cannot tell you what legal path to take, but it can help you ask the right questions and keep a clean paper trail.

Use related calculators

For end-of-service planning, you may also want the Severance Pay Calculator, the Retirement Savings Calculator, and the Salary Tax Calculator to build a complete transition budget.