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Lumpsum Calculator → ITR CalculatorWhat is gratuity?
Gratuity is a lump-sum reward an employer pays for long service, governed by the Payment of Gratuity Act, 1972. You are generally eligible after 5 years of continuous service (this condition is waived on death or disablement).
How gratuity is calculated
For employees covered by the Act, gratuity is 15/26 × last-drawn monthly (basic + DA) × completed years of service. The 26 represents working days in a month and 15 represents 15 days' wages for each year. If you serve more than 6 months into a year, it rounds up to a full year. For employees not covered by the Act, a common formula is 15/30 × average monthly salary × years, and part-years are not rounded up.
Is gratuity taxable?
For covered private-sector employees, gratuity is exempt up to ₹20 lakh across your lifetime; anything beyond that is added to your income and taxed at your slab rate. Government employees' gratuity is fully exempt. Use the ITR calculator to see the effect of any taxable portion.
Frequently asked questions
How is gratuity calculated in India?
For covered employees: 15/26 × last-drawn monthly (basic + DA) × completed years of service. A period beyond 6 months counts as a full year.
Is gratuity taxable?
It is exempt up to ₹20 lakh over a lifetime for covered private employees; amounts above that are taxable. Government employees' gratuity is fully exempt.
What is the minimum service for gratuity?
Generally 5 years of continuous service, except in cases of death or disablement where the 5-year rule is waived.