Find Out Exactly How Much Gratuity You Are Owed
Enter your last drawn salary and total years of service — this gratuity calculator tells you the exact amount your employer must pay you when you retire, resign, or are let go after five or more years of continuous service. It also shows how much of that amount is tax-free under the current rules for FY 2025-26.
How to Use This Gratuity Calculator
- Last drawn basic salary + DA: Enter your most recent monthly basic salary plus Dearness Allowance (DA) in rupees. Gratuity is calculated on this figure, not your total CTC or in-hand salary.
- Years of service: Type the total number of completed years you have worked with the same employer. You need at least 5 years to be eligible.
- Hit Calculate: The tool instantly shows your gratuity payout, the ₹20 lakh tax-free cap, and the taxable portion (if any).
Worked Example – See the Numbers in Action
Suppose Priya works at a manufacturing company for 18 years. Her last drawn basic salary + DA is ₹65,000 per month.
Gratuity = (15 ÷ 26) × ₹65,000 × 18
= 0.5769 × ₹65,000 × 18
= ₹6,75,000The result: ₹6,75,000 — well within the ₹20 lakh tax-free limit, so Priya pays zero tax on the full amount.
Now suppose Rahul retires after 35 years with a basic + DA of ₹1,20,000 per month.
Gratuity = (15 ÷ 26) × ₹1,20,000 × 35
= ₹24,23,077 (approx.)Here the payout crosses ₹20 lakh. The first ₹20 lakh is fully tax-free; the remaining ~₹4.23 lakh is added to Rahul's taxable income for that financial year.
How Gratuity Is Calculated – The Formula Explained
The formula comes straight from the Payment of Gratuity Act, 1972:
Gratuity = (15 ÷ 26) × Last Drawn Basic Salary (+ DA) × Years of Service- 15 = 15 days' wage for each year of service
- 26 = the number of working days assumed in a month (4 Sundays excluded)
- Last Drawn Salary = Basic Pay + Dearness Allowance only (HRA, bonuses, and other allowances are excluded)
- Years of Service = completed years; a tenure of, say, 12 years and 7 months counts as 13 years (anything above 6 months rounds up)
| Scenario | Basic + DA (monthly) | Years | Gratuity Payable | Taxable? |
|---|---|---|---|---|
| Mid-career professional | ₹40,000 | 10 | ₹2,30,769 | No (under ₹20 L cap) |
| Senior manager | ₹90,000 | 25 | ₹12,98,077 | No (under ₹20 L cap) |
| Long-serving executive | ₹1,50,000 | 30 | ₹25,96,154 | Yes – ₹5.96 L taxable |
Key Rules and Limits for FY 2025-26
- Eligibility: You must have completed at least 5 years of continuous service with one employer. (Exception: death or disability — gratuity is paid regardless of tenure.)
- Tax-free cap: Up to ₹20 lakh is fully exempt from income tax under Section 10(10) of the Income Tax Act. This limit was raised from ₹10 lakh in 2019 and remains ₹20 lakh for AY 2026-27.
- Who it covers: All employees at companies with 10 or more employees fall under the Payment of Gratuity Act. Even after a company shrinks below 10, existing employees remain covered.
- Government employees: The entire gratuity received is tax-free (no upper cap applies to central government staff).
- Payment timeline: Your employer must pay gratuity within 30 days of it becoming due. Delays attract simple interest.
- Both tax regimes: The ₹20 lakh exemption applies whether you file under the old or new tax regime — it is a direct exemption, not a deduction.
For the official text, see the Income Tax Department (incometax.gov.in) — search Section 10(10) for the exact exemption language.
Practical Tips to Get the Most Accurate Result
- Use Basic + DA only. Many people mistakenly enter their full CTC or gross salary. The formula uses only basic pay plus DA — nothing else.
- Round up partial years correctly. If you have served 14 years and 8 months, enter 15 years (six months or more rounds up). If it is 14 years and 4 months, enter 14 years.
- Check your appointment letter. Some private employers follow a more generous formula (e.g., one month's salary per year). If yours does, your actual payout will be higher than what this calculator shows — it uses the statutory minimum formula.
- Plan your exit timing. Leaving at, say, 4 years and 9 months means you forfeit your gratuity. Stretching to the 5-year mark can add a meaningful lump sum to your savings.
- Gratuity + PF together: Factor in your Provident Fund corpus as well — the two together form the core of most employees' retirement savings.
What This Calculator Does Not Cover
- Surcharge and cess on the taxable portion (applicable if your total income crosses ₹50 lakh) — a tax professional can compute those based on your full income.
- Gratuity from employers who use a different contractual formula (higher than the statutory one).
- Gratuity calculations for seasonal workers, who follow a slightly different working-day count under the Act.
All calculations happen entirely in your browser. No salary or personal data is sent to any server — your numbers stay on your device.
Knowing your gratuity amount in advance helps you plan your retirement corpus far more accurately. Use the calculator above to run your own numbers in seconds.