About gratuity calculator
Gratuity is a lump sum an employer pays when an employee leaves after at least five years of service, under the Payment of Gratuity Act.
Formula
Gratuity = last drawn salary (basic + DA) × 15 ÷ 26 × years of service. With a salary of ₹40,000 and 8 years of service: 40,000 × 15 ÷ 26 × 8 = ₹1,84,615.
Details
- A period of more than six months is rounded up to a full year.
- There is a ceiling on the tax-free amount.
- Employees not covered by the Act follow a slightly different formula.
Another worked example
With a last drawn basic plus DA of ₹50,000 and 12 years of service, gratuity is 50,000 × 15 ÷ 26 × 12 = about ₹3,46,154. Service of 12 years and 7 months is counted as 13 years, since a period above 6 months is rounded up.
