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Calculate the gratuity payable on leaving a job, under the Payment of Gratuity Act.
Formula
Gratuity = 15 × last drawn (Basic + DA) × years of service / 26
Worked example
Last Basic + DA of Rs 60,000 and 12 years of service: Gratuity = 15 × 60000 × 12 / 26 = Rs 4,15,385. Service of 6 months or more counts as a full year.
Quick reference
| Basic + DA | 10 yr | 20 yr | 30 yr |
|---|---|---|---|
| Rs 30,000 | Rs 1.73 L | Rs 3.46 L | Rs 5.19 L |
| Rs 60,000 | Rs 3.46 L | Rs 6.92 L | Rs 10.38 L |
| Rs 1,00,000 | Rs 5.77 L | Rs 11.54 L | Rs 17.31 L |
Rounded; capped at Rs 20,00,000 tax-free.
Frequently asked questions
Who is eligible for gratuity?
Employees of establishments covered by the Payment of Gratuity Act become eligible after completing five years of continuous service, except in the case of death or disablement.
Why is the formula divided by 26?
The Act treats a month as 26 working days (excluding Sundays), so 15 days’ wages is 15/26 of the monthly Basic + DA.
Is gratuity taxable?
Gratuity up to Rs 20,00,000 is tax-free for employees covered by the Act. Anything above that is taxed as salary.