Statutory Personal & Employment Finance
Gratuity Calculator
Accurately compute your statutory gratuity payout in India under the Payment of Gratuity Act, 1972 (15/26 rule) or non-covered guidelines (15/30 rule). Verify eligibility, 7-month service rounding, and the ₹20 Lakh tax exemption ceiling.
🔒 100% Private & In-Memory: All calculations run locally in your browser using Decimal.js. Your salary, dates, and financial data are never stored, logged, or transmitted anywhere.
Common Employment Scenarios
Select a representative scenario or enter your own salary and service details:
1. Employment Coverage & Separation Details
Select the governing gratuity framework and the reason for leaving service:
Establishments with 10+ employees are covered under the Payment of Gratuity Act, 1972 (15/26 days formula).
Section 4(1) requires 5 continuous years for resignation; requirement waived for death or disablement.
2. Last Drawn Qualifying Wages
Enter qualifying wage components recognized under Section 2(s) of the Payment of Gratuity Act:
Core salary component (mandatory under statutory gratuity definition).
Applicable in PSUs, government, and manufacturing sectors (defaults to 0 for private corporate CTC).
Fixed commissions on turnover recognized as wages; HRA, bonuses, and special allowances are excluded.
3. Service Tenure & Duration
Provide your tenure either by entering completed years & months or selecting calendar dates:
Your Gratuity Payout Summary
₹2,76,923
Eligible: Has completed 7 years of continuous service, satisfying the statutory 5-year threshold under Section 4(1).
8 Years
₹2,308/day
₹2,76,923
₹20,00,000
(15 / 26) × Qualifying Monthly Wage (₹60000) × Effective Service (8 years)
Itemized Gratuity Calculation Breakdown
| Calculation Parameter / Component | Value / Statutory Basis |
|---|---|
| Basic Monthly Salary | ₹60,000 |
| Dearness Allowance (DA) | ₹0 |
| Total Qualifying Monthly WageComponents recognized under Section 2(s) of Payment of Gratuity Act. | ₹60,000 |
| Service Tenure Recorded | 7 years, 8 months |
| Effective Service Count for GratuityFraction > 6 months rounded up to full year under Section 4(2). | 8 years |
| Formula Applied | (15 / 26) × Qualifying Monthly Wage (₹60000) × Effective Service (8 years) |
| Computed Raw Gratuity | ₹2,76,923 |
| Statutory Ceiling CapMaximum tax-exempt limit under Section 4(3) POGA and Sec 10(10) Income-tax Act. | ₹20,00,000 |
| Net Payable Gratuity | ₹2,76,923 |
| Tax-Exempt Portions (Sec 10(10)) | ₹2,76,923 |
💡 Understanding Gratuity in India (Payment of Gratuity Act, 1972)
How Statutory Gratuity is Calculated
Under Section 4(2) of the Payment of Gratuity Act, 1972, for employees covered under the Act, gratuity is calculated as 15 days' wages for every completed year of service or part thereof in excess of 6 months. A month is treated as 26 working days, making one day's wage equal to (Basic + DA) / 26. The statutory formula is: Gratuity = (15 / 26) × (Basic + DA) × Effective Service Years. If remaining service exceeds 6 months (i.e. 7 months or more), it rounds up to the next full year. For establishments not covered by the Act, the formula is 15 / 30 (or half month) multiplied by completed full years only without rounding up.
Deterministic Example Walkthrough
Consider an employee with a last drawn basic salary of ₹60,000/month and DA of ₹0 who resigns after 7 years and 8 months of service in an establishment covered under the Act. 1) Eligibility: Having served over 5 continuous years, the employee is eligible. 2) Effective service: Because 8 months exceeds 6 months, tenure rounds up to 8 years. 3) Calculation: (15 / 26) × ₹60,000 × 8 = ₹2,76,923.08 (rounded to ₹2,76,923). 4) Tax Exemption: Since ₹2,76,923 is well below the statutory ₹20,00,000 cap, the entire amount is 100% tax-free under Section 10(10).
⚠️ Statutory Compliance Notice
This calculator provides an indicative informational estimate based on the Payment of Gratuity Act, 1972, the 2018 amendment enhancing the ceiling to ₹20 Lakhs, and Section 10(10) of the Income-tax Act, 1961. It does not constitute a legal determination, formal payroll settlement, or tax advice. Final settlement is determined by employer payroll records, approved gratuity trust deed rules, and competent labour authority directives.
Frequently Asked Questions
- What is the 5-year continuous service rule for gratuity?
- Under Section 4(1) of the Payment of Gratuity Act, 1972, an employee becomes eligible for gratuity only upon rendering continuous service of at least 5 years with the same employer. However, the second proviso to Section 4(1) waives this 5-year condition entirely if termination is due to death or permanent disablement.
- How does the 7-month service rounding rule work?
- Under Section 4(2) of the Act for covered establishments, any period of service in excess of 6 months (i.e., 7 months or more) is rounded up to the next completed full year. For example, 5 years and 7 months is treated as 6 years. Conversely, 5 years and 6 months is treated as 5 years.
- What is the maximum tax-free gratuity limit in India?
- Following the Payment of Gratuity (Amendment) Act, 2018 and corresponding Central Board of Direct Taxes (CBDT) notifications under Section 10(10)(ii)/(iii) of the Income-tax Act, the maximum tax-exempt gratuity ceiling for private sector employees is ₹20,00,000 (₹20 Lakhs). Any amount paid above ₹20 Lakhs is taxable as salary income.
- Why are HRA, bonus, and special allowances excluded from the calculation?
- Section 2(s) of the Payment of Gratuity Act explicitly defines 'wages' as all emoluments earned by an employee while on duty, specifically including Basic Salary and Dearness Allowance, but explicitly excluding bonus, commission (unless fixed on turnover), HRA, overtime, and other flexible allowances.
Frequently asked questions
What is the 5-year continuous service rule for gratuity?
Under Section 4(1) of the Payment of Gratuity Act, 1972, an employee becomes eligible for gratuity only upon rendering continuous service of at least 5 years with the same employer. However, the second proviso to Section 4(1) waives this 5-year condition entirely if termination is due to death or permanent disablement.
How does the 7-month service rounding rule work?
Under Section 4(2) of the Act for covered establishments, any period of service in excess of 6 months (i.e., 7 months or more) is rounded up to the next completed full year. For example, 5 years and 7 months is treated as 6 years. Conversely, 5 years and 6 months is treated as 5 years.
What is the maximum tax-free gratuity limit in India?
Following the Payment of Gratuity (Amendment) Act, 2018 and corresponding Central Board of Direct Taxes (CBDT) notifications under Section 10(10)(ii)/(iii) of the Income-tax Act, the maximum tax-exempt gratuity ceiling for private sector employees is ₹20,00,000 (₹20 Lakhs). Any amount paid above ₹20 Lakhs is taxable as salary income.
Why are HRA, bonus, and special allowances excluded from the calculation?
Section 2(s) of the Payment of Gratuity Act explicitly defines 'wages' as all emoluments earned by an employee while on duty, specifically including Basic Salary and Dearness Allowance, but explicitly excluding bonus, commission (unless fixed on turnover), HRA, overtime, and other flexible allowances.