Estimate gratuity under the Payment of Gratuity Act, with the ₹20 lakh tax-free ceiling.
Estimated gratuity
₹5,07,692.31
(15 × ₹80,000.00 × 11 years) ÷ 26 = ₹5,07,692.31
Gratuity is a lump sum an employer pays for long service — a statutory thank-you funded entirely by the employer, with nothing deducted from your salary. For staff covered by the Payment of Gratuity Act, the law fixes the amount at 15 days of last-drawn salary for every completed year of service. The catch is how “15 days’ salary” is computed: the Act treats a working month as 26 days, so a day’s pay is your monthly salary divided by 26, and 15 days is (15 × last salary × years) ÷ 26. Salary here means basic pay plus dearness allowance — not gross, not CTC.
Suppose your last-drawn basic-plus-DA is ₹80,000 a month and you have worked 10 years and 7 months. Because the final part-year exceeds six months, service rounds up to 11 years. The formula gives (15 × ₹80,000 × 11) ÷ 26 = ₹5,07,692. Had you left at 10 years and 5 months instead, the final year would drop, service would count as 10 years, and the figure would fall to about ₹4,61,538 — the same salary, roughly ₹46,000 less, decided entirely by two months. When a resignation date is near a six-month boundary, that rounding rule is worth a moment’s planning.
The divisor is the tell. Employers covered by the Act (broadly, establishments with 10 or more employees) use 26, which makes gratuity slightly higher. Employers outside the Acttypically compute on a 30-day month, so the same service yields a smaller number. This calculator lets you switch between the two with the checkbox; if you are unsure, most salaried private-sector employees in sizeable companies are covered.
Gratuity is one slice of what leaving (or joining) a job is really worth. To see how the rest of a package resolves into monthly cash, the salary calculator breaks a CTC into in-hand pay, and the CTC to in-hand guide explains where each component — including gratuity — sits inside the offer.
For employees covered by the Payment of Gratuity Act, gratuity = (15 × last drawn salary × years of service) / 26, where salary means basic pay plus dearness allowance. Service beyond 6 months in the final year is rounded up to a full year.
Gratuity is exempt from tax up to ₹20 lakh in a lifetime for covered employees. Amounts above the ₹20 lakh statutory ceiling are taxable as per your slab.
Generally yes — gratuity is payable after 5 years of continuous service, except in cases of death or disablement, where the 5-year condition is waived.
For employees covered by the Act the divisor is 26 (working days in a month). For employees not covered by the Act, employers typically use 30 days.
The Payment of Gratuity Act treats a month as 26 working days (excluding four weekly offs), so 15 days’ pay is calculated as 15/26 of the monthly salary. Dividing by the smaller number makes covered-employee gratuity slightly higher than the 15/30 figure used for those outside the Act.
Under the Act, only the final year is rounded: more than 6 months counts as a full year, 6 months or less is dropped. So 10 years 7 months counts as 11 years, but 10 years 5 months counts as 10. Earlier years are always counted in full.
For covered private-sector employees, gratuity is tax-exempt up to a lifetime limit of ₹20 lakh; anything above that is taxed at your slab. Government employees receive gratuity fully tax-free. The limit is cumulative across your career, not per employer.
Generally no — five years of continuous service is the eligibility threshold for resignation or retirement. The only exceptions are death or disablement, where the five-year condition is waived and gratuity is paid for the service completed.
Last reviewed: June 28, 2026
This calculator provides planning estimates based on the assumptions shown on this page.
This is a planning estimate, not legal or tax advice. Actual gratuity depends on your employment terms and statutory rules.