Gratuity Calculator

Gratuity is a lump-sum payment made by an employer to an employee at the time of leaving the organisation. It is one of the key retirement benefits provided to employees who have completed at least five years of continuous service.

In India, gratuity payments are governed by the Payment of Gratuity Act, 1972, which defines eligibility, calculation rules, and maximum payout limits.

What Is a Gratuity Calculator?

A gratuity calculator is an online tool that helps employees estimate the gratuity amount they may receive based on:

• Last drawn basic salary
• Dearness allowance (DA)
• Total years of service

The calculator uses the standard gratuity formula defined under Indian law and provides instant results without manual calculations.

Formula to Calculate Gratuity

The Payment of Gratuity Act, 1972 categorises employees into two groups:

• Category 1: Employees covered under the Gratuity Act
• Category 2: Employees not covered under the Gratuity Act

Note:

• Gratuity is calculated assuming 26 working days in a month
• Gratuity is paid for 15 days' salary for every completed year of service

How to Calculate Gratuity?

Standard Gratuity Formula

Gratuity (G) = (n × b × 15) / 26

Where:
n = Number of completed years of service
b = Last drawn monthly basic salary + Dearness Allowance

Category 1: Employees Covered Under the Gratuity Act

Employees working in organisations covered under the Act are eligible for gratuity after completing 5 years of continuous service.

Formula

Gratuity = (n × b × 15) / 26

If the service period exceeds 6 months, it is rounded up to the next full year.

Example

Ms Richa worked at XYZ Pvt. Ltd. for 10 years and 2 months.
Her last drawn salary (basic + DA) is ₹2,00,000.
Gratuity = (10 × 2,00,000 × 15) / 26
Gratuity Amount = ₹11,53,846

Category 2: Employees Not Covered Under the Gratuity Act

Employees whose employers are not covered under the Act may still receive gratuity, but calculation rules differ.

Formula

Gratuity = (n × b × 15) / 30

Only completed years of service are considered.

Example

Mr Utkarsh worked at XYZ Pvt. Ltd. for 5 years and 9 months.
Last drawn salary = ₹75,000
Gratuity = (5 × 75,000 × 15) / 30
Gratuity Amount = ₹1,87,500

How to Use the Paytm Gratuity Calculator?

To calculate gratuity using Paytm's calculator, enter:

• Last drawn monthly salary (basic + DA)
• Total years and months of service

The calculator instantly displays the estimated gratuity amount.

How Does a Gratuity Calculator Help You?

A gratuity calculator helps when you meet any of the following eligibility conditions:

• Superannuation or retirement
• Completion of 5 years of service
• Resignation, termination, or voluntary retirement

Key Benefits

• Accurate gratuity estimation
• Saves time compared to manual calculation
• Free and easy to use
• Accessible anytime, anywhere
• Useful for long-term financial planning

Gratuity Eligibility Criteria

An employee is eligible for gratuity if:

• He or she completes 5 years of continuous service
• Employment ends due to resignation, retirement, or termination
• The employee does not hold another full-time job

Exception:
The 5-year rule does not apply in case of death, disability, or illness.

Gratuity Rules in India

• The maximum gratuity limit is ₹20 lakh
• If service exceeds 6 months, it is rounded up to the next year
• Any amount beyond the prescribed limit is treated as ex-gratia
• Employers may forfeit gratuity in cases of misconduct, as per the Act

Taxation Rules on Gratuity

Gratuity taxation depends on employee type:

Employees Covered Under the Gratuity Act

Gratuity is tax-exempt up to ₹20 lakh.

Employees Not Covered Under the Act

Tax exemption is allowed on the least of:

• ₹20 lakh
• Actual gratuity received
• Half-month salary for each completed year of service

Where Should You Invest Gratuity Amount?

Gratuity proceeds can be invested in safe and stable instruments such as:

Fixed Deposits
Offers stable returns (approx. 5.5%-7.5%)
Easy to calculate maturity using FD calculators

Senior Citizen Savings Scheme (SCSS)
Government-backed retirement scheme
Eligible for tax benefits under Section 80C