What is the Gratuity Calculator?
Gratuity is a lumpsum reward paid by employers to employees who complete five or more years of continuous service. The FinanceDeck Gratuity Calculator computes the exact amount under the Payment of Gratuity Act using the last drawn basic + DA.
Gratuity is often forgotten during job changes but can amount to a meaningful chunk when you finally leave a long-tenured job. Knowing your accrued gratuity helps in negotiations, retirement planning and evaluating early-exit offers.
How does it work?
The Act formula is 15 × last drawn basic × years of service ÷ 26 — the denominator 26 reflects the number of working days in a month. Fractions of a year above six months round up; below round down.
Employees not covered by the Act (typically in smaller organisations) may still get gratuity by employer policy, but the formula and tax exemption limit differ. The Act's tax-free ceiling is currently ₹20 lakh.
Gratuity = (15 × Last Basic × Years of Service) / 26Example
Last basic + DA of ₹45,000/month after 10 years of service.
Gratuity = (15 × 45,000 × 10) / 26 = ₹2,59,615. Since it's under the ₹20 lakh exemption limit and you served over 5 years, the entire amount is tax-free.
Benefits
- ✓Tax-free up to ₹20 lakh (Act-covered employees)
- ✓Rewards long tenure — no clawback
- ✓Automatic entitlement after 5 years
- ✓Paid within 30 days of exit
- ✓Helps size a proper retirement plan
Frequently Asked Questions
Is 5 years mandatory?
Yes — under the Act. In case of death or disability, the 5-year rule is waived and dependents get gratuity regardless of tenure.
Can employer refuse to pay?
No — it's a statutory right for Act-covered establishments (10+ employees). Non-payment attracts penalty and interest.
Does gratuity apply to contractors?
Contract employees on your payroll may qualify. Third-party contract workers usually don't unless the contract specifies it.
Are 4 years 8 months eligible?
Legally 5 years, but tribunals have often accepted 240 continuous days in the fifth year as sufficient.
Related Calculators
Plan every goal in one place
Combine your loans, SIPs and savings inside the free FinanceDeck Planner.
Learn more in the Learning Center
Deep-dive guides that explain the concepts behind the Gratuity Calculator.