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Gratuity Calculator (Payment of Gratuity Act, 1972)

Estimate the gratuity payable to an employee under the Payment of Gratuity Act, 1972. Enter the last drawn monthly salary (basic + DA) and the length of service to get an indicative gratuity amount, and check it against the statutory tax-exempt ceiling.

Estimated gratuity
₹3,11,538

Rounded service used for the formula: 9 year(s) (7 additional month(s) rounds up to a full year).

This is within the statutory tax-exempt gratuity cap of ₹20,00,000.

How this is calculated

Under Section 4 of the Payment of Gratuity Act, 1972, gratuity for employees covered by the Act is computed as:

Gratuity = (15 × Last drawn monthly salary [basic + DA] × Years of service) / 26

"Years of service" is rounded to the nearest full year for this formula: a period of service of 6 months or more in the final year is treated as one additional full year, while a period of less than 6 months is ignored. The divisor 26 represents the number of working days in a month used by the Act.

  • Applies to employees under the Payment of Gratuity Act, 1972 who have completed 5+ years of continuous service (subject to exceptions such as death or disablement).
  • The statutory tax-exempt ceiling on gratuity is currently ₹20,00,000 — amounts above this may attract tax under the Income Tax Act.
  • Employers may pay a higher gratuity than the statutory formula, but the tax exemption is capped at the statutory ceiling.

Sources & legal basis

  • Payment of Gratuity Act, 1972 — Section 4 (computation of gratuity).
  • Payment of Gratuity (Amendment) Act — statutory tax-exempt ceiling notifications.
  • Income Tax Act, 1961 — Section 10(10), exemption of gratuity up to the notified ceiling.

Verify the current tax-exempt gratuity ceiling and rounding rule with a qualified advocate or tax advisor before relying on this estimate; the statutory cap is revised periodically by government notification.

Frequently asked questions

For employees covered by the Payment of Gratuity Act, 1972, gratuity = (15 × last drawn monthly salary [basic + DA] × years of service) / 26.

A period of service of 6 months or more beyond a completed year is rounded up to one additional full year. A period of less than 6 months is not counted.

Gratuity received under the Payment of Gratuity Act is exempt from income tax up to a statutory ceiling (currently ₹20,00,000 under Section 10(10) of the Income Tax Act). Amounts above the ceiling may be taxable. Verify the current ceiling with a tax advisor.

Generally, employees who have completed 5 or more years of continuous service with an employer covered by the Act, subject to exceptions such as death or disablement during service.

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