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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 continuous service. It is a lump-sum retirement benefit and tenure payout given when you resign, retire, or superannuate after at least 5 years of service.

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 after excluding four Sundays. Your gratuity equals 15 working days of salary for every full year of service. The formula divides your monthly basic pay plus DA by 26 to get your daily wage, then multiplies that by 15 and your total years of service.

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

Yes. Completing 5 years of continuous service is mandatory under the Payment of Gratuity Act 1972. The only exceptions are death or permanent disability caused by accident or illness, where the 5-year requirement is waived and gratuity is paid immediately to you or your nominee.

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 rounds up to the next full year. For example, 6 years and 7 months counts as 7 years, while 6 years and 5 months rounds down to 6 years.

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

The maximum tax-free gratuity limit under Section 10(10) of the Income Tax Act is ₹20 Lakh. Any gratuity amount you receive above ₹20 Lakh is added to your annual taxable income and taxed at your regular income tax slab.

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

No. The formula uses only your Last Drawn Basic Salary and Dearness Allowance (DA). House Rent Allowance (HRA), annual bonuses, overtime pay, commissions, and special allowances are excluded by statute.

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. 1
    Last Drawn Monthly Salary: Type your basic salary plus dearness allowance (cost-of-living payment) from your last paycheck.
  2. 2
    Years of Service: Type the total number of years you have worked at the company.
  3. 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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