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All-in-one HR platform · v2.0
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All-in-one HR platform · v2.0
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Fifteen days' wages for every completed year of service, on a twenty-six day divisor, once five years of continuous service are complete.
Gratuity is a statutory entitlement under the Payment of Gratuity Act rather than a discretionary benefit, and its formula is fixed. What varies between employers is the administration, how a claim is processed, how continuous service is computed across a break, and whether the liability has been provisioned before it falls due.
This calculator applies the statutory formula to the figures you enter, and shows the position for an employee who has not yet reached the qualifying period.
Enter your figures, then press Calculate
Your 5 inputs become a full breakdown, with every step of the working shown beneath the headline figures.
The statutory formula under the Payment of Gratuity Act, then each term in it: what counts as continuous service, what counts as last drawn wages, and how part-years are rounded.
Gratuity = (15 ÷ 26) × Last drawn (basic + DA) × Years of service, capped at ₹20,00,000
Gratuity becomes payable on completing five years of continuous service. The Act also prescribes circumstances in which the five-year condition does not apply.
Last drawn basic plus dearness allowance divided by twenty-six. The Act uses a twenty-six day month, reflecting working days rather than calendar days.
Fifteen times the daily wage gives the entitlement for one completed year of service.
Completed years, with a final part-year of more than six months counted as a full year (Section 4(2)).
The amount payable under the Act is capped at ₹20,00,000.
What this does not include
Asked often enough about this calculation to be worth answering beside it.
The Payment of Gratuity Act computes a daily wage on a twenty-six day month, reflecting working days rather than calendar days. Using thirty would understate the entitlement.
On last drawn basic salary plus dearness allowance, not on gross. This is why a salary structure with an unusually low basic reduces both present provident fund contributions and future gratuity.
It is not payable, but the liability is accruing. The calculator shows what would be payable at five years on the current basic, which is the figure worth provisioning against, so that a long-serving employee reaching eligibility is a settlement rather than a surprise on the books.
Gratuity = (15 ÷ 26) × last drawn basic plus DA × years of service, payable once five years of continuous service are complete, and capped at ₹20,00,000.
Yes. The amount payable under the Payment of Gratuity Act is capped at ₹20,00,000, and the calculator shows the uncapped figure alongside when the cap applies.
A final part-year of more than six months counts as a full year. Six months or less is ignored. So 7 years 7 months is paid as 8 years, and 7 years 6 months as 7.
Gratuity becomes payable on completing five years of continuous service, but the Act also prescribes circumstances in which the five-year condition does not apply.
No. The tax treatment of gratuity in a full-and-final settlement has its own rules and is not addressed by this calculator.
A calculator applies a rule to figures you type in. A payroll run applies it to your actual employee record, your locations and your verified declarations, which is where Professional Tax, LWF and TDS also resolve.
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