Gratuity is a lump sum your employer pays you when you leave after 5+ years of service. Calculate your exact gratuity amount using the official government formula.
Formula: (Basic + DA) × 15 × Years ÷ 26 | Service above 6 months in last year is rounded up to 1 year
Last updated: April 08, 2026
Gratuity is a retirement benefit paid by your employer as a thank-you for long service. Under the Payment of Gratuity Act, 1972, any employee who has completed 5 or more years of continuous service is entitled to gratuity when they resign, retire, or are terminated. The only exception is termination for misconduct — in that case, gratuity can be forfeited.
Important: If you have completed 4 years and 240 days (approximately 4 years and 8 months), many courts have held that this counts as 5 years for gratuity purposes. So even if you are a few months short of 5 years, you may still be eligible — check with your HR.
For employees covered under the Gratuity Act (companies with 10+ employees):
Gratuity = (Last Drawn Basic Salary + DA) × 15 × Years of Service ÷ 26
The "15" represents 15 days of wages for each year of service. The "26" represents the working days in a month (30 minus 4 Sundays). If your last completed year of service is more than 6 months, it is rounded up. For example, 7 years and 8 months is counted as 8 years.
For private sector employees, gratuity up to ₹20 lakh is exempt from income tax. Any amount above ₹20 lakh is added to your taxable income for that year. For government employees, gratuity is fully exempt from tax with no upper limit. The ₹20 lakh limit was increased from ₹10 lakh in 2019.
Related: Salary Calculator | CTC Breakdown Guide | Income Tax Calculator