How gratuity works
Gratuity is a lump-sum benefit paid to employees as a reward for long service, governed by the Payment of Gratuity Act, 1972. It is paid on retirement, resignation (after 5+ years), death or disability. A gratuity provision is not necessarily a monthly contribution to an individual fund; employer funding arrangements vary.
Gratuity formula
- Covered under Act: Gratuity = (Last Basic + DA) × 15 ÷ 26 × Years of service
- Not covered: Gratuity = (Last Basic + DA) × 15 ÷ 30 × Years of service
Worked examples
| Last Basic + DA | Years | Gratuity |
|---|---|---|
| ₹40,000 | 5 | ₹1,15,385 |
| ₹60,000 | 10 | ₹3,46,154 |
| ₹80,000 | 15 | ₹6,92,308 |
| ₹1,00,000 | 20 | ₹11,53,846 |
| ₹1,50,000 | 25 | ₹21,63,461 before any applicable statutory cap or tax exemption |
Taxation
Exemption depends on employee category, qualifying salary and service, prior exemptions and applicable limits. The tool simply labels up to ₹20 lakh as exempt; that is not an individual tax determination. Confirm current law and your category with payroll or an adviser.
Checking your result
Gratuity estimates depend on three inputs: the last drawn qualifying salary, the completed years of service and the formula set by the law or contract that applies to you. Small differences in how partial years are rounded can change the figure, so compare the estimate with your employer's written policy before you rely on it.
Treat the calculator as a planning estimate, not a final settlement statement. Tax treatment and statutory caps can change between budget years, so confirm the current limits with your HR or payroll team.
Gratuity per ₹10,000 of last drawn basic + DA
| Years of service | Gratuity |
|---|---|
| 5 | ₹28,846 |
| 10 | ₹57,692 |
| 15 | ₹86,538 |
| 20 | ₹1,15,385 |
| 25 | ₹1,44,231 |