What is the gratuity formula in India?

For employers covered by the Payment of Gratuity Act, gratuity is 15 ÷ 26 × your last drawn monthly basic salary plus dearness allowance × years of service. A part year above six months counts as a full year. Employers not covered by the Act often use 15 ÷ 30 × average salary instead, counting only completed years.

Am I eligible for gratuity before five years?

Normally gratuity is payable only after five years of continuous service. The five-year condition does not apply when employment ends because of death or disablement. Some court rulings have treated four years and 240 working days in the fifth year as five years of continuous service, so ask your employer how it applies the rule.

Which salary is used to calculate gratuity?

The Act uses the wages you last drew: basic salary plus dearness allowance, without HRA, bonus, commission, overtime or other allowances. Check your last salary slip and use the basic and DA lines, not your gross salary or CTC, unless your employer’s policy says otherwise.

Is there a maximum limit on gratuity?

Yes. Under the Act the gratuity payable is capped at a ceiling notified by the central government, which this calculator applies for covered employers. An employer can choose to pay more under a better contract or policy. Income tax exemption on gratuity has its own limits, so check the tax treatment separately.

Gratuity Calculator India – 15/26 Formula

Free Gratuity Calculator

Enter your last basic salary plus DA and your years of service to estimate gratuity with the Indian 15/26 formula, rounding rule and five-year condition. Under the Payment of Gratuity Act, gratuity is 15 ÷ 26 × last drawn monthly basic plus DA × years of service, so ₹50,000 and six counted years gives ₹1,73,077.

How gratuity is calculated

Gratuity is a lump sum your employer pays when you leave after long service. For employers covered by the Payment of Gratuity Act — those with ten or more employees — the formula is:

Gratuity = 15 × last drawn monthly (basic + DA) × years of service ÷ 26

15 is fifteen days of wages for each year of service; 26 is the number of working days the Act assumes in a month.
Years of service are rounded: a part year above six months counts as a full year. Five years and seven months counts as six; five years and six months counts as five.
Example: basic plus DA of ₹50,000 and five years seven months of service gives 15 ÷ 26 × 50,000 × 6 = ₹1,73,077.
The amount payable under the Act is capped at ₹20,00,000.

If your employer is not covered by the Act

Smaller employers may still pay gratuity under a contract or policy. Many use 15 ÷ 30 × the average salary of the last ten months × completed years, without the six-month rounding. Your appointment letter or HR policy has the final word.

Before you plan your exit

Gratuity is normally payable only after five years of continuous service, except on death or disablement.
The employer should pay within 30 days of it becoming due; ask HR to include it in your full and final settlement statement.
Labour law reforms can change the rules — for example for fixed-term employees — so check the current position with HR.

Planning your exit? Find your last day with the notice period calculator, project your provident fund with the PF calculator, see your new take-home pay with the CTC to in-hand calculator and write your resignation letter.

Worked example

Leaving after five years and seven months

What goes in

Last drawn basic + DA: ₹50,000 a month Service: 5 years 7 months Employer covered by the Gratuity Act: yes

What you get

Seven extra months is more than six, so the service rounds up to 6 years. The formula for covered employers is 15 ÷ 26 × last drawn basic + DA × years, which is 15 ÷ 26 × 50,000 × 6 = ₹1,73,077. If the employer were not covered by the Act and paid gratuity on its own policy at 15 ÷ 30, the same service would give ₹1,50,000. The page shows the formula with these numbers so the employee can check the figure HR sends in the full and final settlement.

Common mistakes

Using the gross or CTC figure instead of basic plus dearness allowance, which overstates gratuity and leads to disputes during the full and final settlement.

Rounding up exactly six extra months; only service of more than six months in the final year counts as a full year.

Assuming nothing is due before five years without checking the exceptions, such as death or disablement, and any shorter period your employer policy allows.

When to use it: Use it before resigning or while checking a settlement, to see roughly what gratuity to expect and whether the figure HR quotes follows the standard formula.