What is a Gratuity Calculator & How to Calculate Gratuity in India?

Gratuity is a financial benefit provided by employers to employees as a token of appreciation for their long-term service. It’s a lump sum amount paid when an employee leaves a company after completing a certain period of continuous service, usually five years or more.

But how do you calculate it? That’s where a Gratuity Calculator comes in handy. Let’s understand what it is, how it works, and how you can compute gratuity yourself—manually or using a free online tool.

Gratuity Calculator

Employee Name (optional) Last Drawn Basic Salary (₹) Years of Service Additional Months

✅ What is a Gratuity Calculator?

A Gratuity Calculator is an online tool that helps you estimate the amount you are eligible to receive as gratuity upon retirement, resignation, or termination (in some cases).

It automates the gratuity formula defined under the Payment of Gratuity Act, 1972, saving time and reducing human error. By entering a few basic details like your last drawn salary and years of service, the calculator instantly provides an estimate of your gratuity payout.

🎯 Who is Eligible for Gratuity?

According to Indian labor laws, gratuity is payable if:

The employee has completed at least 5 years of continuous service (except in the case of death or disability).
The employer is covered under the Payment of Gratuity Act, 1972 (i.e., has 10 or more employees).

Gratuity is typically paid at the time of:

Resignation
Retirement
Superannuation
Layoff
Death or disability (no minimum service required)

🧮 How to Calculate Gratuity?

👉 Gratuity Formula (as per the Gratuity Act):

Gratuity = (15 / 26) × Last Drawn Salary × Completed Years of Service

Where:

15 = number of days of salary for each completed year
26 = number of working days in a month (as per the Act)
Last Drawn Salary = Basic Salary + Dearness Allowance (DA)
Completed Years = Only full years are counted. If you’ve worked 7 years and 6+ months, it’s rounded up to 8 years. Less than 6 months is ignored.

🔢 Example:

If your last drawn salary is ₹30,000 and you’ve worked for 7 years and 7 months, the calculation would be:

Gratuity = (15 / 26) × 30,000 × 8
         ≈ ₹138,462

🖥️ How Does the Gratuity Calculator Work?

A gratuity calculator typically asks for:

Your last basic salary
Years and months of service
(Optional) Your name and sector (private or government)

It uses the formula mentioned above to calculate the gratuity amount and displays the result instantly.

🏛️ Gratuity for Government Employees

For government employees, the calculation may slightly differ. Some departments use a full month’s salary instead of the 15/26 ratio. However, the intent remains the same—rewarding years of loyal service.

💰 Is Gratuity Taxable?

Up to ₹20 lakh of gratuity is tax-exempt under Section 10(10) of the Income Tax Act.
Any amount above ₹20 lakh is taxable under “Income from salary.”

🧑‍💼 Why Use an Online Gratuity Calculator?

Benefits of using a gratuity calculator:

✅ Quick and accurate calculation
✅ Saves time and avoids manual errors
✅ Easy INR formatting
✅ Helps in retirement and exit planning
✅ Some calculators even show tax-exempt portions

🔗 Try Our Free Gratuity Calculator Tool

Want to find out how much gratuity you’re eligible for?

👉 Use our Gratuity Calculator Tool — it's fast, free, and accurate.

📝 Final Words

Gratuity is more than just a financial obligation—it’s a reward for loyalty and dedication. By understanding how gratuity is calculated, you can better plan your exit strategy, retirement, or financial future.

Use a Gratuity Calculator today to find out what you deserve. It’s simple, smart, and essential!

❓ FAQs on Gratuity

1. Who is eligible to receive gratuity?

Any employee who has completed 5 or more years of continuous service with the same organization is eligible.

2. Is gratuity taxable in India?

Gratuity received by government employees is fully tax-exempt. For private sector employees, gratuity is tax-free up to ₹20 lakh (as of the latest rules).