Gratuity Calculator — Payment of Gratuity Act Calculator india | AliGreat.com

Free Gratuity Calculator for India — calculate your statutory gratuity payout under the Payment of Gratuity Act, 1972, instantly.

Gratuity is a lump-sum payment employers in India are legally required to pay employees who complete a minimum period of continuous service, but very few employees actually know how the exact amount is calculated, or when they become eligible for it. The Gratuity Calculator on AliGreat.com applies the exact statutory formula from the Payment of Gratuity Act, 1972, so you can estimate your payout in seconds.

What does the Gratuity Calculator do?

Enter your last drawn basic salary plus dearness allowance, your total years of service, and whether your employer is covered under the Payment of Gratuity Act. The calculator shows the gratuity amount payable under the applicable formula, the amount after applying the statutory tax-exemption cap, and whether you meet the minimum eligibility threshold at all.

The formula behind it

For employers covered under the Payment of Gratuity Act, the formula is:

Gratuity = (Last drawn salary × 15 × Completed years of service) / 26

Here, “last drawn salary” means your basic pay plus dearness allowance (not your full CTC or gross salary), 15 represents 15 days of wages for every completed year of service, and 26 represents the number of working days in a month under this Act’s calculation convention. For establishments not covered under the Act, some employers apply a similar but distinct formula using 30 days as the divisor instead of 26, and this calculator lets you toggle between the two.

A worked example

Suppose your last drawn basic plus DA is ₹50,000, and you’ve completed exactly 10 years of continuous service at an establishment covered under the Act.

Gratuity = (50,000 × 15 × 10) / 26 ≈ ₹2,88,462

Now compare the same inputs but at an establishment not covered under the Act, using the 30-day divisor instead: Gratuity = (50,000 × 15 × 10) / 30 = ₹2,50,000 — a meaningfully lower figure purely due to the different divisor used, illustrating why it matters to know whether your specific employer falls under the Act’s coverage or not.

The 5-year minimum eligibility rule

Under the Payment of Gratuity Act, an employee must complete a minimum of 5 years of continuous service with the same employer to become eligible for gratuity — with narrow exceptions made for cases of death or disablement during service, where the 5-year minimum is waived entirely. If you leave a job before completing 5 full years (barring these exceptions), you generally forfeit any statutory gratuity entitlement, regardless of how close you were to the 5-year mark. This calculator flags ineligibility clearly if you enter fewer than 5 years of service, since it’s a hard threshold under the law rather than a gradually phased-in benefit.

Which employers are “covered” under the Act?

The Payment of Gratuity Act applies to any factory, mine, oilfield, plantation, port, railway company, shop, or other establishment employing 10 or more people on any day in the preceding 12 months — once an establishment becomes covered, it generally continues to be covered even if its headcount later falls below 10. Most organised-sector companies in India, including most private companies, IT firms, and larger retail or service businesses, fall under this coverage. Smaller establishments with fewer than 10 employees may not be legally covered under the Act, though some employers voluntarily pay gratuity on a similar basis as a matter of policy even without a strict legal obligation to do so — it’s always worth checking your specific employment contract and HR policy for clarity on this point.

The ₹20 lakh tax exemption cap

Gratuity received is exempt from income tax up to a specified lifetime aggregate limit — currently ₹20 lakh — for employees covered under the Payment of Gratuity Act. This cap applies cumulatively across your entire career, not per employer or per instance of gratuity received, meaning if you’ve already received tax-exempt gratuity from a previous employer, that amount counts against your remaining ₹20 lakh exemption limit for any future gratuity received from subsequent employers. Any gratuity amount received above this cumulative ₹20 lakh limit is taxable as per your applicable income tax slab in the year received. This calculator shows both the raw calculated gratuity figure and the amount after applying this statutory cap, so you can see clearly whether your specific payout is likely to fall entirely within the tax-exempt zone or partly exceed it.

“Completed years of service” — how partial years are treated

A detail that trips up many employees: the Act specifies that a period of service exceeding 6 months in the final year is rounded up and counted as one full additional year for gratuity calculation purposes, while a period of 6 months or less in that final year is disregarded entirely. For example, an employee with exactly 10 years and 7 months of service is treated as having 11 years of service for gratuity calculation, while an employee with 10 years and 5 months is treated as having exactly 10 years. This calculator’s “years of service” input should reflect this rounding convention for the most accurate estimate.

How gratuity differs from other retirement benefits

Gratuity is entirely distinct from, and paid in addition to, your Employee Provident Fund (EPF) balance, any Employee Pension Scheme (EPS) benefit, and any leave encashment you may be owed at the time of resignation or retirement. Unlike EPF, where both you and your employer contribute a percentage of your salary every month into an accumulating fund, gratuity is typically funded entirely by the employer (either paid directly from company funds when due, or through a group gratuity insurance policy the employer maintains), with no monthly deduction visible on your payslip — which is part of why many employees are less aware of gratuity as a benefit compared to the more visible, regularly-deducted EPF contribution.

Gratuity on resignation vs retirement vs termination

Gratuity is payable on resignation, retirement, superannuation, or (with the 5-year minimum waived) death or disablement — but is generally not payable if an employee is terminated specifically for proven misconduct involving moral turpitude or acts causing financial loss to the employer, subject to specific legal provisions and due process requirements under the Act. For a standard voluntary resignation after completing at least 5 years of continuous service, gratuity is a straightforward statutory entitlement calculated using the formula above, regardless of the specific reason for resigning.

Gratuity and your overall CTC structure

It’s worth knowing that many companies factor an estimated gratuity accrual into your total CTC (Cost to Company) figure as a notional annual provision, even though you don’t actually receive this amount until you leave the company after completing the minimum eligibility period. AliGreat.com’s Salary Calculator specifically accounts for this gratuity accrual when breaking down a CTC figure into its various components, which is part of why the sum of your visible monthly in-hand components doesn’t fully add up to your total annual CTC — the gratuity provision (among a few other components) sits in the background as a future, contingent entitlement rather than current cash compensation.

Who should use this calculator

Anyone planning to resign after several years at a company, approaching retirement, or simply curious about their accumulated gratuity entitlement at their current organisation will find this calculator useful for an accurate, formula-based estimate. HR professionals and payroll teams can also use it as a quick, independent cross-check against internal payroll calculations for a specific employee’s gratuity settlement.

Frequently asked questions

Do I get gratuity if I resign before completing 5 years? Generally no, except in cases of death or disablement during service, where the 5-year minimum requirement is waived under the Act.

Is gratuity calculated on my full salary including allowances like HRA? No — the statutory formula uses only your last drawn basic pay plus dearness allowance, not your full gross salary or CTC.

Is gratuity fully tax-free? Gratuity is tax-exempt up to a cumulative lifetime limit of ₹20 lakh for employees covered under the Act; any amount received above this cumulative limit across your career is taxable as per your income tax slab.

What if my company has fewer than 10 employees? Your establishment may not be legally covered under the Payment of Gratuity Act, in which case a different, and sometimes less favourable, gratuity calculation may apply, or your employer may not be legally obligated to pay gratuity at all — check your specific employment contract and company policy.

Try it now

Open the Gratuity Calculator on AliGreat.com, enter your salary and years of service, and see your exact statutory gratuity entitlement — free, instant, and based on the exact legal formula.