Free calculator · FY 2026-27

Gratuity calculator

Work out the gratuity due when someone leaves: the formula under the Payment of Gratuity Act (now part of the Code on Social Security), the rounding of the last part-year, the five-year rule and the ₹20 lakh ceiling.

Gratuity payable

₹1,84,615

15 ÷ 26 × ₹40,000 × 8 years

Years counted	8
One day's wage (÷ 26)	₹1,538
Formula result	₹1,84,615
Payable	₹1,84,615

7 months is more than six, so it counts as a full year.

For guidance, not advice. Figures follow the rules as published for FY 2026-27 (checked 10 October 2026); check unusual cases with your accountant.

How it is worked out

Gratuity is a lump sum an employer pays to someone who leaves after long service — on resignation, retirement, death or disablement. It applies to establishments with 10 or more employees.

The formula pays 15 days' wages for every year of service. A month's wages are treated as 26 working days, so a day's wage is the last monthly basic + DA ÷ 26.

The rules used

Gratuity = 15 ÷ 26 × last drawn monthly basic + DA × years of service.
A final part-year of more than six months counts as a full year; six months or less is dropped.
Payable after at least five years of continuous service. Fixed-term employees qualify after one year under the Code on Social Security (in force since 21 November 2025). On death or disablement, there is no minimum.
The ceiling is ₹20,00,000. Gratuity paid under the Act is tax-free up to that amount for private-sector employees.
An employer not covered by the Act may pay gratuity voluntarily; the customary formula then is 15 ÷ 30 × salary × completed years.

Assumptions. Some courts have counted 4 years and 240 days as five years of continuous service; this calculator uses completed years. Check the treatment for your case.

A worked example

Suresh leaves after 7 years and 7 months. His last drawn basic + DA was ₹40,000 a month, and his employer is covered by the Act.

Years counted (7 years + more than 6 months = 8)	8
15 ÷ 26 × ₹40,000 × 8	₹1,84,615
Below the ₹20 lakh ceiling, so payable	₹1,84,615

Had he left at 7 years and 6 months, only 7 years would count: ₹1,61,538.

Questions people ask

What is the gratuity formula?

15 × last drawn monthly basic + DA × years of service ÷ 26. For ₹30,000 and 10 years: 15 × 30,000 × 10 ÷ 26 = ₹1,73,077.

Is gratuity payable before five years?

For a permanent employee, not on resignation — five years of continuous service is the rule. Fixed-term employees qualify after one year under the Code on Social Security, and on death or disablement no minimum applies.

Does 4 years 7 months count as 5 years?

Not by the rounding rule: rounding of a part-year over six months applies once someone is eligible. Some High Courts have held that 4 years and 240 days of work in the fifth year is continuous service of five years; check whether that applies to you.

What is the maximum gratuity?

₹20,00,000. Anything an employer pays above that is an ex-gratia payment and taxable.

Is gratuity calculated on gross salary?

On basic pay plus dearness allowance. Since the Labour Codes came into force, if excluded allowances exceed half of total pay, the excess counts as wages — which can raise gratuity where basic was kept low.

Sources · rules checked on 10 October 2026

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