Gratuity calculator — Payment of Gratuity Act.

The formula

For establishments covered under the Payment of Gratuity Act, 1972, gratuity is calculated as 15 × last drawn monthly salary (basic + DA) × completed years of service, divided by 26. The "26" represents working days in a month under the Act's convention, so the formula effectively pays roughly 15 days of salary for every completed year of service. Only basic pay and DA count — HRA, bonus, conveyance and other allowances are excluded from the salary figure.

Rounding service correctly

Years of service are not simply truncated. If, in the final (incomplete) year, the employee has worked more than 6 months, that year is rounded up to a full year. So 9 years 7 months becomes 10 years for the formula, while 9 years 5 months stays at 9 years. This rounding step is where manual calculations often go wrong — the calculator applies it for you.

The ₹20 lakh ceiling

Since the 2018 amendment, the maximum gratuity payable under the Act is ₹20,00,000, regardless of what the formula computes. This is also the ceiling for tax exemption under Section 10(10) for private-sector employees. If your formula result exceeds ₹20 lakh, the calculator caps the payable amount and flags it — any amount an employer pays above this cap is treated as taxable ex gratia, not statutory gratuity.

Beyond this calculator

This tool applies the standard formula for employers covered under the Act. It does not cover the alternate formula for employers not covered under the Act (which uses a 30-day divisor and half-month's salary for each completed year), seasonal establishments, or death/disablement cases where the 5-year eligibility requirement is waived. For payroll compliance across PF, ESI, PT, TDS and gratuity provisioning, see our payroll software guide.