Free Tool · Payment of Gratuity Act, 1972
Enter your basic salary and years of service to calculate your exact gratuity — including eligibility check, tax treatment, and claim guide.
A gratuity calculator works out the lump-sum reward your employer must pay for long service under the Payment of Gratuity Act, 1972. The statutory formula is Gratuity = (last-drawn Basic + DA) × 15 × years of service ÷ 26. For example, on a Basic + DA of ₹50,000 and 10 years of service, gratuity = 50,000 × 15 × 10 ÷ 26 = ₹2,88,462 — fully tax-free, since the tax-exempt ceiling is ₹20,00,000. You qualify after 5 years of continuous service (waived on death or disability). Enter your figures below for your exact entitlement.
Use only Basic + DA — not your full gross salary or CTC. Most private-sector employees have zero DA.
Enter a decimal for partial years: 5.5 = 5 years 6 months, 7.25 = 7 years 3 months.
The Payment of Gratuity Act, 1972 defines who qualifies and under what conditions. Here is everything you need to know.
You ARE eligible when:
Watch out for:
There are two formulas depending on whether your employer is covered under the Act.
Not covered under the Gratuity Act
Smaller establishments, seasonal workers
(Basic + DA) × 15 × Years ÷ 30Basic + DA
₹50,000/month
Service
7 years 4 months
Rounds to
7.5 years
Employer
Covered (÷26)
Gratuity = 50,000 × 15 × 7.5 ÷ 26
= 50,000 × 112.5 ÷ 26
= 56,25,000 ÷ 26
= ₹2,16,346
Well below the ₹20L cap — fully tax-exempt.
Rounding note: 7 years 4 months → 4 months is between 1–6, so it rounds to 0.5 year → service used = 7.5 years. If it were 7 years 8 months, the 8 months would round up to 1 year → service used = 8 years.
The tax exemption on gratuity depends on your category of employment. The ₹20 lakh limit was revised upward in 2019 via the Finance Bill and applies per employee (lifetime aggregate across all employers).
Government employees
Fully exempt — no upper limit
Central and state government employees, and employees of certain autonomous bodies receive full exemption on gratuity with no rupee cap under Section 10(10)(i).
Private sector — Gratuity Act covered
Exempt up to ₹20,00,000
The least of: (a) actual gratuity received, (b) gratuity computed under the Act (15/26 formula), or (c) ₹20,00,000. In practice, this means the ₹20L cap is the binding constraint for most high earners.
Private sector — Not covered by Act
Exempt up to lowest of three limits
Exempt up to the least of: (a) actual gratuity received, (b) ½ month salary per completed year of service (using average salary of last 10 months), or (c) ₹20,00,000. The calculation is more complex — consult your CA.
The claim process is straightforward if you follow the prescribed forms and timelines.
Submit Form I to your employer
Within 30 days of becoming eligible (resignation, retirement, or superannuation). Legal heirs submit Form J in cases of death. Self-nomination via Form F should have been submitted during employment.
Employer acknowledges within 15 days
If accepting, the employer issues Form L specifying the amount. If disputing the claim or the quantum, the employer issues Form M with reasons. You have the right to dispute a rejection or underpayment.
Payment within 30 days of becoming payable
The employer must pay gratuity within 30 days of the date it becomes payable (typically your last working day or the date of death/disability). Ask HR for written confirmation of the amount and payment timeline.
Interest applies if payment is delayed
If the employer delays payment beyond 30 days without a reasonable cause, they must pay simple interest at 10% per annum on the outstanding amount from the due date until actual payment.
Dispute resolution via Labour Court
If your employer refuses payment or underpays, file a complaint with the Controlling Authority (typically the Labour Commissioner) under the Payment of Gratuity Act. The authority can direct payment with interest. Further appeals lie with the Appellate Authority and then the High Court.
Common questions about gratuity eligibility, calculation, and tax treatment in India.
Gratuity = (Last drawn Basic + DA) × 15 × Years of Service ÷ 26, for employers covered under the Payment of Gratuity Act, 1972. The 15 represents days of wages per year of service, and 26 represents the working days in a month. For employers not covered by the Act, the divisor is 30 instead of 26.
Gratuity is calculated on Basic Salary plus Dearness Allowance (DA) only — not on the full CTC. It does not include HRA, special allowance, or variable pay. Most private-sector employees have zero DA, so the formula uses only Basic salary in practice.
You are not eligible for gratuity if you resign before completing 5 years of continuous service, except in cases of death or permanent disability. Even if you have served 4 years and 11 months, you are not entitled to gratuity on normal resignation — only death or disability waives the 5-year minimum.
Yes. Maternity leave availed under the Maternity Benefit Act is treated as continuous service for the purposes of the Payment of Gratuity Act. It does not break continuity of service and counts toward the 5-year minimum eligibility period.
Gratuity is compulsory for establishments with 10 or more employees under the Payment of Gratuity Act, 1972. Once an establishment qualifies (reaches 10 employees), it remains covered even if headcount later drops below 10. Many states have extended coverage to smaller establishments through state amendments.
Employers can provision for gratuity in the CTC (typically ~4.8% of Basic salary), but this is an accounting provision — not optional payment. Gratuity is a statutory obligation payable when the employee becomes eligible. Including it in CTC does not allow an employer to reduce or withhold it at the time of payment.
For HR Leaders & Employers
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