About the Gratuity Calculator
Gratuity is a lump-sum benefit paid by an employer for long service, typically after five or more years. This calculator estimates the amount using the common formula under the Payment of Gratuity Act for employees it covers.
How gratuity is calculated
For covered employees the formula is (15 × last drawn monthly salary × years of service) ÷ 26, where salary means Basic + Dearness Allowance. The payout is capped at the statutory maximum of ₹20 lakh.
Putting a gratuity to work
A gratuity is a meaningful lumpsum — investing it thoughtfully can compound into much more over time. Many people deploy part of it as a lumpsum in diversified funds and keep an emergency buffer in safe instruments.
Gratuity Calculator — frequently asked questions
Who is eligible for gratuity?
Employees generally become eligible after completing five years of continuous service with an employer covered by the Payment of Gratuity Act (with exceptions for death or disability).
Is gratuity taxable?
Gratuity is tax-exempt up to prescribed limits (₹20 lakh for covered employees), with the balance taxable. Rules differ for government and other employees — consult a tax adviser.
What salary is used in the formula?
The last drawn monthly salary, taken as Basic pay plus Dearness Allowance.