Gratuity is a lump sum paid to employees who complete 5 or more years of continuous service. It's calculated using a fixed statutory formula and is tax-free up to ₹20 lakh for private-sector employees. This calculator applies the exact formula prescribed by the Payment of Gratuity Act 1972 — including the "more than 6 months counts as a full year" rule — and lets you download a clean letter format suitable for HR and finance teams.
How it works: Enter the joining date, leaving date, and last drawn monthly basic + DA. The calculator shows your eligibility, completed years, gratuity amount, and tax-free portion. Then click "Download Letter PDF" for a formal letter you can hand over or email.
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Your Gratuity
Frequently Asked Questions
Who is eligible for gratuity in India?
Employees who complete 5 or more years of continuous service in an organisation with 10+ employees, under the Payment of Gratuity Act 1972. The 5-year rule is waived in case of death or permanent disability.
What is the formula for gratuity calculation?
Gratuity = (15 × last drawn basic + DA × completed years of service) ÷ 26. This calculator applies that formula exactly, plus the ₹20 lakh tax-free cap.
How are partial years counted?
If you worked more than 6 months in the final year, it counts as a full year. Less than 6 months is ignored. Example: 7 years 5 months = 7 years; 7 years 7 months = 8 years.
Is gratuity taxable?
Government employees: fully tax-free. Private employees: minimum of (₹20 lakh, actual received, calculated formula amount) is tax-free. Anything above ₹20 lakh is added to your income and taxed at slab rate.
When must the employer pay gratuity?
Within 30 days of last working day. If delayed, the employer must pay simple interest at the rate notified by the central government from the due date till payment.
What if my employer is not covered under the Act?
Many large employers voluntarily pay gratuity even when not covered. The formula they use may differ (often based on half-month salary per year of service). Check your offer letter or HR policy.