Salaried Exit & Retirement
Gratuity Calculator
Leaving your job or planning retirement? Calculate your exact statutory gratuity payout, service tenure rounding credit, and Section 10(10) tax exemption in seconds.
Last Drawn Monthly Basic + Dearness Allowance (DA)
Core Salary Only
₹
Under the Act, exclude HRA, bonuses, overtime, and special travel allowances.
Completed Continuous Service Tenure
Years & Months
Yrs
Mos
Tenure > 6 months rounds up to the next full year under the Act (e.g. 6 yrs 8 mos = 7 years).
Actual Gratuity Received (Optional Tax Check)
Optional
₹
Enter the actual amount offered if your company pays above the statutory minimum.
Enter your monthly basic salary and years of continuous service above to calculate your exact gratuity payout and tax-exempt breakdown.
How to Use This Gratuity Calculator
- Select Your Coverage Mode: Choose between Covered under Gratuity Act (standard for companies with 10+ employees) or Not Covered under Act (firms with under 10 employees).
- Enter Your Basic Salary + DA: Type in your last drawn monthly Basic Pay plus Dearness Allowance (DA). Do not include allowances like HRA, travel reimbursement, or annual bonus incentives.
- Input Continuous Service Years & Months: Enter the exact duration you worked with the company. The calculator automatically calculates the legal 6-month rounding credit.
- Review Payout & Tax Exemption: Instantly inspect your gross gratuity payout, statutory daily wage rate, and tax-exempt breakdown under Section 10(10).
The Gratuity Calculation Formula
The mathematical formula used depends on whether your organization is covered under the Payment of Gratuity Act, 1972:
Category A (Covered under Act):
Gratuity = (Last Drawn Basic Salary + DA) × 15 × Completed Years of Service ÷ 26
Gratuity = (Last Drawn Basic Salary + DA) × 15 × Completed Years of Service ÷ 26
Here is what each component represents:
- Last Drawn Basic + DA: The fixed basic salary and dearness allowance paid in your final month of active employment. Variable bonuses and HRA are legally excluded.
- 15 Days of Wages: Mandated by the Act as half a month's standard earnings per completed year of loyalty.
- 26 Working Days: Assumes 26 working days in a calendar month by excluding 4 Sundays, reflecting your true per-day earning power.
- Service Tenure Rounding Rule: If your tenure includes additional months greater than 6 (e.g. 6 years and 7 months), it is rounded up to the next full year (7 years). Any period 6 months or less rounds down.
Category B (Not Covered under Act):
Gratuity = (Average 10-Month Salary + DA) × 15 × Completed Years of Service ÷ 30
Gratuity = (Average 10-Month Salary + DA) × 15 × Completed Years of Service ÷ 30
For establishments outside the Act, the divisor is 30 calendar days, the base is the average salary of the last 10 months, and fractional months are strictly ignored (no rounding up).
Worked Example Scenario
Consider Priya, a software engineering manager resigning from an IT firm covered under the Gratuity Act after 6 years and 8 months of service. Her last drawn monthly basic pay was ₹40,000.
Step-by-Step Arithmetic:
1. Tenure Rounding: 6 years and 8 months exceeds 6 months, so credited service rounds up to 7 years.
2. Daily Wage Equivalent: ₹40,000 ÷ 26 = ₹1,538.46 per day.
3. Annual Allotment: 15 days × ₹1,538.46 = ₹23,076.92 per completed year.
4. Total Gratuity Payout: ₹23,076.92 × 7 years = ₹1,61,538.46.
5. Tax Exemption Check: Because ₹1,61,538.46 is well under the ₹20,00,000 Section 10(10) ceiling, the entire payout is 100% tax-free.
Frequently Asked Questions
How is gratuity calculated after 5 years of service?
Under Section 4(1) of the Payment of Gratuity Act 1972, an employee must complete at least 5 years of continuous service with an organization to be eligible for gratuity upon resignation or retirement. The 5-year requirement is waived only in the unfortunate event of death or permanent disablement due to accident or disease.
How does the 6-month rounding rule work for service tenure?
If an employee covered under the Act has completed more than 5 years of service, any remaining period exceeding 6 months is credited as a full additional year. For instance, working 7 years and 7 months yields 8 years of gratuity credit. However, if you work 7 years and 5 months, it counts as 7 years.
Is gratuity income completely tax-free under Indian law?
For non-government employees, gratuity is exempt under Section 10(10) of the Income Tax Act up to a lifetime cumulative limit of ₹20 Lakh (₹20,00,000). Any gratuity received exceeding this statutory ceiling is added to your total income and taxed at your applicable income tax slab rate.
Can an employer deduct or withhold gratuity payout?
Gratuity can only be forfeited under very narrow statutory grounds: termination resulting from willful damage to employer property (limited to the financial loss caused) or dismissal for moral turpitude or violent conduct. Routine resignations or layoffs cannot be used to withhold legally earned gratuity.
What components of salary are included in the gratuity calculation?
Only Basic Pay and Dearness Allowance (DA) are factored into the calculation. Allowances such as House Rent Allowance (HRA), conveyance, medical reimbursements, annual performance bonuses, and overtime pay are legally excluded from the formula.