What is a Gratuity Calculator?
Gratuity is a lump sum an employer pays for continuous service, and the formula under the Payment of Gratuity Act is fixed: fifteen days of the last drawn salary for every completed year, worked out on a twenty six day month.
Enter the last drawn monthly salary, meaning basic plus dearness allowance rather than the full CTC, and the years of service. The tool shows the formula figure, the statutory ceiling and what is actually payable.
Two things trip people up. The salary in the formula is basic plus DA, not take home and not CTC, so using the wrong figure inflates the result badly. And the Act normally requires five years of continuous service, so a shorter stint usually produces no entitlement even though the formula returns a number.
Frequently asked questions
What is the gratuity formula?
Fifteen multiplied by the last drawn salary multiplied by the years of service, divided by twenty six. The twenty six is a working month excluding Sundays, which is why the figure is higher than fifteen thirtieths of a month.
Which salary goes into the formula?
Basic pay plus dearness allowance. Not CTC, not gross, and not take home. Using the full CTC is the most common mistake and overstates the result significantly.
Do I need five years of service?
Under the Act, generally yes: five years of continuous service. There are exceptions, including death or disablement. A period above six months in the final year is usually rounded up to a full year.
Is gratuity taxable?
For employees covered by the Act, gratuity is exempt up to the statutory ceiling of twenty lakh, taken across your working life rather than per employer. Anything above that is taxable.