CodeKitHubWhat Is This Tool?
Gratuity is a lump-sum benefit paid by an employer to an employee as a token of appreciation for continuous service, governed in India by the Payment of Gratuity Act, 1972. It's separate from your provident fund (PF), final salary or any leave encashment.
The formula is Gratuity = (15 × last drawn salary × years of service) ÷ 26. "Last drawn salary" means your basic pay plus dearness allowance (DA) only — house rent allowance (HRA) and other allowances are excluded. The 26 represents the number of working days assumed in a month (a 6-day work week, excluding 4 Sundays).
Years of service are rounded: if you've completed more than 6 months in your final year, it counts as a full additional year; 6 months or less rounds down. For example, 7 years and 7 months rounds up to 8 years, while 7 years and 4 months stays at 7.
Under Section 4(3) of the Act (as amended in 2018), the maximum gratuity payable is capped at ₹20,00,000, regardless of how the formula works out above that amount. This cap applies to private-sector employees; government employees have their own separate rules.
Eligibility generally requires 5 or more years of continuous service with the same employer, though this requirement is waived in cases of the employee's death or disablement. This calculator estimates the amount only — it doesn't check eligibility.
Source: Payment of Gratuity Act, 1972, Section 4(3) gratuity cap (as amended 2018).
Why Use It?
- Applies the official 15/26 formula and ₹20,00,000 cap automatically — no manual calculation needed.
- Handles the year-rounding rule for you (over 6 months rounds up, 6 months or less rounds down).
- Works for any salary and tenure combination, including fractional years.
- Free and instant — no signup, the calculation runs entirely in your browser.
How to Use
- Enter your last drawn monthly salary (basic pay + dearness allowance only, excluding HRA and other allowances).
- Enter your full years of service.
- Enter any extra months in your final, partial year (0 if none).
- Read your estimated gratuity, with the applicable rounding shown.
Example
Input
Last drawn salary ₹50,000/month, 7 years and 7 months of serviceOutput
Estimated gratuity: ₹2,30,7697 months in the final year is more than 6, so it rounds up to 8 full years. (15 × 50,000 × 8) ÷ 26 = 60,00,000 ÷ 26 = ₹2,30,769.23, well under the ₹20,00,000 cap.
Gratuity formula at a glance
| Component | Value |
|---|---|
| Formula | (15 × last drawn salary × years of service) ÷ 26 |
| Last drawn salary | Basic pay + DA only (HRA and other allowances excluded) |
| Year rounding | >6 months rounds up, ≤6 months rounds down |
| Statutory cap | ₹20,00,000 (private sector) |
| Minimum service | 5+ years (waived for death/disablement) |
Related tools
These calculators cover similar end-of-employment benefits in other countries.
→ Gulf Gratuity Calculator · Redundancy Calculator (Ireland)
Frequently Asked Questions
Why divide by 26 instead of 30 or 31?
26 represents the assumed number of working days in a month under a standard 6-day work week (30 or 31 calendar days minus roughly 4 Sundays). This is a fixed constant in the statutory formula, not based on your actual working days.
What counts as "last drawn salary"?
Only your basic pay plus dearness allowance (DA) at the time of leaving. House rent allowance (HRA), conveyance allowance, bonuses and other perks are excluded from the gratuity calculation, even if they're part of your regular monthly pay.
How does the year-rounding rule work exactly?
If the extra time beyond your last full year is more than 6 months, it rounds up to a full additional year. If it's exactly 6 months or less, it rounds down and doesn't count. For example, 10 years 6 months stays at 10 years, but 10 years 6 months and 1 day rounds up to 11.
Is there a maximum gratuity amount?
Yes — ₹20,00,000, under Section 4(3) of the Payment of Gratuity Act as amended in 2018. If the formula produces a higher figure, the payout is capped at this amount.
Do I need 5 years of service to get gratuity?
Generally yes — the Act requires 5 or more years of continuous service. This requirement is waived if employment ends due to the employee's death or disablement, in which case gratuity is payable regardless of tenure. This calculator estimates the formula result only; it doesn't check whether you meet the eligibility criteria.
Is my data stored anywhere?
No. The calculation runs with JavaScript directly in your browser; your salary is never sent to a server or stored anywhere.