MoneyWiseGuide
Calculate your gratuity amount based on Indian labor law (Payment of Gratuity Act, 1972)
Enter your employment details to calculate gratuity
Gratuity = (Basic + DA) × 15 × Years ÷ 26
Gratuity = (Basic + DA) × 15 × Years ÷ 30
As per the Payment of Gratuity Act, the maximum gratuity that can be paid is ₹20 Lakh. This limit is tax-free under current Indian tax laws.
To be eligible for gratuity under the Payment of Gratuity Act, 1972, an employee must have completed at least 5 years of continuous service with the same employer. However, in cases of death or disablement, gratuity is payable even if the employee has not completed 5 years. This applies to organizations with 10 or more employees. The service period includes breaks due to sickness, accident, leave, strike, or lockout.
Gratuity is calculated using the formula: (Last drawn salary × Years of service × 15) / 26, where salary includes basic pay plus dearness allowance. The 15 represents 15 days' wages for each completed year of service, and 26 is the number of working days in a month. For employees covered under the Gratuity Act, the maximum gratuity amount is capped at ₹20 lakh as of 2026.
The 15/26 formula is used for employees covered under the Payment of Gratuity Act (typically working 5 or 6 days a week), while 15/30 is used for employees working all 7 days like those in factories, mines, oilfields, plantations, ports, railway companies, or shops. The 15/26 formula assumes 26 working days per month, while 15/30 assumes a full month. Government employees also use the 15/30 formula.
For employees covered under the Gratuity Act, gratuity received is tax-exempt up to ₹20 lakh (increased from ₹10 lakh in 2016). For government employees, the entire gratuity amount is tax-exempt. For non-covered employees, the exemption is limited to the least of: ₹20 lakh, actual gratuity received, or (15 days salary × years of service) / 30. Any amount exceeding these limits is taxable as per the employee's income tax slab.
Gratuity becomes payable when an employee retires, resigns after completing 5 years, retires on superannuation, or in case of death or disablement (even before completing 5 years). The employer must pay gratuity within 30 days from the date it becomes payable. If delayed beyond 30 days, the employer must pay simple interest on the gratuity amount from the due date until actual payment.
Yes, gratuity is payable even if an employee resigns, provided they have completed at least 5 years of continuous service. The resignation must be voluntary and not due to misconduct. The amount is calculated in the same manner as retirement gratuity. However, if the employee is terminated for misconduct involving moral turpitude (like theft, fraud, or violence), the employer can forfeit the gratuity.
In case of resignation, gratuity is payable if the employee has completed 5 years of service. In case of termination, gratuity is payable only if termination is not due to misconduct, willful omission, or negligence causing damage to employer's property. If terminated for such misconduct, the employer can forfeit all or part of the gratuity. However, if terminated without cause or due to redundancy, the employee is entitled to full gratuity after 5 years of service.
An employer can refuse or forfeit gratuity only if the employee's service has been terminated for any act, willful omission or negligence causing damage or loss to the employer's property, or for riotous or disorderly conduct, or any act of violence, or for an offense involving moral turpitude committed in the course of employment. However, the employer must prove the misconduct. If refused unfairly, the employee can file a complaint with the controlling authority within 90 days of non-payment.