Financial Calculators
Gratuity Calculator
Calculate gratuity payout based on your last drawn salary and years of service.
This tool provides an estimate or a starting draft. Check the assumptions and current official requirements before relying on the result. It does not replace qualified financial, legal or medical advice.
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Gratuity is a lump-sum payment made by an employer to an employee as a token of appreciation for services rendered. In India, it is governed by the Payment of Gratuity Act, 1972, which makes it mandatory for establishments employing 10 or more people. An employee becomes eligible for gratuity after completing 5 years of continuous service. On separation (retirement, resignation, or termination), the employer must pay the gratuity within 30 days.
The gratuity formula under the Act is: Gratuity = (Last drawn basic salary + DA) × 15/26 × Years of service. The divisor 26 represents the working days in a month (52 weeks × 5 days / 2), and 15 represents 15 days of salary per year of service. For organisations not covered under the Act (typically those with fewer than 10 employees), the formula uses 30 as the divisor instead of 26, resulting in a lower payout.
The maximum tax-exempt gratuity under Section 10(10) is ₹20 lakh for private sector employees (raised from ₹10 lakh in 2018). Anything above ₹20 lakh is taxable as income. Government employees receive full tax exemption on gratuity. If an employee has worked for more than 6 months in the final year, it is rounded up to the next full year for gratuity calculation.
How to use this utility
- Use the controls below—paste text, pick files, or adjust options as described on the tool.
- Click the main action button. Processing runs in your browser on this device.
- Download or copy the output. Check the processing note for any external services used by this operation.
Common use cases
- An employee with 12 years of service and a last drawn basic of ₹60,000/month wants to know their gratuity entitlement before resigning.
- An HR manager is calculating gratuity payable to a retiring employee as part of the full and final settlement.
- A new joiner wants to understand how gratuity accrues over their career and factor it into long-term financial planning.
- A business owner is provisioning for gratuity liability across their 50 employees under the Payment of Gratuity Act.
- An employee who has served 4 years 8 months wants to know if it's worth waiting 4 more months to complete 5 years and become eligible.
Tips for best results
- 1Waiting for the 5-year mark before resigning is financially worthwhile. For a ₹50,000 basic salary, the gratuity at 5 years is approximately ₹1.44 lakh — a meaningful addition to your separation package.
- 2Gratuity is calculated on basic salary + DA, not your gross salary or CTC. Companies with a higher basic-to-gross ratio tend to have higher gratuity payouts.
- 3In case of death or permanent disability, gratuity is payable immediately regardless of years of service. Nominate beneficiaries on your employer's gratuity form (Form F).
- 4If your employer delays payment beyond 30 days of separation, they owe you simple interest at 10% per annum on the outstanding gratuity amount.
- 5Companies with fewer than 10 employees are not required to pay gratuity under the Act, but they can pay voluntarily. In such cases, the payment is still tax-exempt up to ₹20 lakh.
Frequently asked questions
- Is Konnect2Tools free?
- Yes. These in-browser tools are completely free to use with no account required for core functionality.
- Do my files leave my device?
- Browser document operations run locally, except where the operation uses an external service, such as AI summarisation. Read the processing note before using sensitive inputs.
- Is the Gratuity Calculator tool safe to use?
- Local operations process document content on your device. External-service operations may send inputs as described in the processing note. Keep originals and inspect the output.
- Does the 5-year rule apply strictly, or is there any relaxation?
- The 5-year rule is strict for resignation and termination. However, if an employee dies or becomes permanently disabled due to an accident or disease while in service, gratuity is payable regardless of tenure.
- Is gratuity calculated on gross salary or basic salary?
- Gratuity is calculated on basic salary + Dearness Allowance (DA) only. HRA, special allowances, bonuses, and other components are excluded. This is why companies with higher basic ratios in their salary structure pay more gratuity.
- Can I forfeit my gratuity?
- Yes, in limited circumstances. An employer can forfeit gratuity (fully or partially) if the employee is terminated for wilful omission, misconduct causing financial loss, or acts of violence. However, this requires a formal disciplinary process.
- Is the ₹20 lakh tax exemption per employer or lifetime?
- The ₹20 lakh exemption is a lifetime limit across all employers. If you have already received ₹20 lakh in tax-free gratuity from previous employers, any further gratuity is fully taxable.
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