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Gratuity Calculator — Calculations & Slabs for FY 2026-27

Enter your last drawn salary and years of service to compute your statutory gratuity amount under the Payment of Gratuity Act 1972, capped at Rs 20 lakh.

1. Employment Variables

The Payment of Gratuity Act and the 15/26 Formula

Gratuity is a financial reward paid by an employer to an employee for their services rendered to the organization. It is a lump-sum amount that serves as a retirement benefit or tenure appreciation.

Why is Gratuity Divided by 26?

The formula for companies covered under the Payment of Gratuity Act uses a factor of 15/26. The number 26 represents the total working days in a month, assuming four Sundays are non-working days.

Therefore, your daily wage is calculated by dividing your last drawn monthly salary (Basic Salary + DA) by 26. This daily wage is then multiplied by 15 days (representing half a month's pay) and your completed years of service.

Frequently Asked Questions (FAQ)

What is the 15/26 rule in the gratuity calculation formula?

The 15/26 rule assumes there are 26 working days in a month (excluding Sundays). The gratuity amount equals 15 days of salary for every completed year of service. To calculate this, your monthly salary is divided by 26 to find the daily wage rate, and then multiplied by 15 and your tenure.

Is it mandatory to complete exactly 5 years of service to get gratuity?

Yes, completing 5 years of continuous service is the general rule to be eligible for gratuity. However, this 5-year lock-in period is waived if your employment ends due to death or permanent disablement caused by an accident or disease. This ensures full compliance with the latest regulations, allowing you to estimate values correctly and avoid common filing errors.

How are fractional months counted under the Payment of Gratuity Act?

If your employer is covered under the Act, any service duration of 6 months or more in your final year of work is rounded up to the next full year. For example, if you serve for 6 years and 7 months, it is counted as 7 years. If you work for 6 years and 5 months, it is rounded down to 6 years.

What is the maximum tax-free gratuity limit in India?

The maximum tax-exempt limit for gratuity is ₹20 Lakhs. If the gratuity you receive exceeds this cap, the extra amount will be added to your taxable income and taxed according to your income tax slab. This ensures full compliance with the latest regulations, allowing you to estimate values correctly and avoid common filing errors.

Does gratuity calculation include bonuses, HRA, or special allowances?

No, the gratuity formula only considers your 'Last Drawn Salary', which is strictly defined as your Basic Salary + Dearness Allowance (DA). House Rent Allowance (HRA), commissions, overtime, special allowances, and annual bonuses are excluded from the calculation. This ensures full compliance with the latest regulations, allowing you to estimate values correctly and avoid common filing errors.

Rates sourced from official government portals — see data sources & verification dates

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About This Calculator

Target Audience: Salaried taxpayers, investors & retirees planning Indian tax & wealth growth Last verified: 2026-06-30

What Does This Calculator Do?

This tool calculates the lump-sum cash reward you get from your employer when you leave a company after working there for 5 years or more. It is a thank-you bonus paid for your long service. It helps you know exactly how much cash you are legally owed when you quit or retire, so you can plan your next career step with confidence.

How to Use It

  1. Last Drawn Monthly Salary: Type your basic salary plus dearness allowance (cost-of-living payment) from your last paycheck.
  2. Years of Service: Type the total number of years you have worked at the company.
  3. Covered under Payment of Gratuity Act: Select yes if your company has 10 or more employees, which is the legal rule.

The Logic Explained Simply

  • The Concept: Think of this as a bonus points system. For every year you work, your company owes you about 15 days of salary. When you leave, they multiply those days by your final salary. If your company is covered by the official law, they divide by 26 days instead of 30 because Sundays are unpaid rest days.
  • The Formula:

For Covered Companies: Gratuity = (15 × Last Drawn Salary × Years of Service) / 26

For Uncovered Companies: Gratuity = (15 × Last Drawn Salary × Years of Service) / 30

Real-World Calculation Breakdown

For example, if your final monthly basic salary is ₹80,000 and you worked at the company for 10 years. If your company is covered under the official gratuity law. The calculator multiplies your salary of ₹80,000 by 10 years and by 15 days, and then divides it by 26 working days. This results in a final tax-free payout of ₹4,61,538.

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