Gratuity: Meaning and Purpose
Gratuity is a lump-sum benefit an employer pays to an employee for long service, governed in India by the Payment of Gratuity Act, 1972. This calculator estimates it from your last drawn salary and years of service.
Factors That Affect the Result
- Last drawn monthly basic salary plus dearness allowance
- Completed years of continuous service
- Months beyond the last full year, for rounding
- Statutory maximum limit on gratuity
- Eligibility of five years of service, with exceptions
How the Gratuity Is Calculated
Gratuity = (Last drawn basic + DA) × 15 × Completed years of service ÷ 26
Service of more than 6 months in the last year is rounded up to the next full year
The 26 in the divisor is the number of working days in a month
Last drawn basic plus DA of ₹50,000 and 10 years of service gives 50,000 × 15 × 10 ÷ 26 = ₹2,88,462.
How to Use This Calculator
- 1Enter the values in the fields on the left. Use figures from your payroll or policy.
- 2The result updates instantly as you type. Change any input to compare scenarios.
- 3Copy the result or print it to attach to your records.
- 4Check the notes under the result for statutory limits and policy points that may apply.
Why It Matters
Gratuity is one of the most common full-and-final settlement items, and errors in the salary base or rounding are a frequent source of employee disputes.
Compliance note: The Act sets a statutory ceiling on tax-free gratuity. Check the current limit and your eligibility before paying.