Understanding Gratuity

Gratuity is a lump sum amount paid by an employer to an employee as a token of appreciation for their long-term service. As per the Payment of Gratuity Act, 1972, an employee is eligible for gratuity if they have completed a minimum of 5 years of continuous service with the same employer.

Why Use This Calculator?

This tool helps you estimate the gratuity amount you are likely to receive when you leave your job. It's useful for financial planning, especially when considering a job change or planning for retirement.

The Formula

For employees covered under the Gratuity Act, the formula is:

Gratuity = (Last Drawn Salary) x (15/26) x (Number of Years of Service)

• Last Drawn Salary includes your Basic Salary and Dearness Allowance (DA).
• 15/26 represents 15 days' salary out of 26 working days in a month.
• Number of Years of Service is rounded up to the nearest full year if service exceeds 6 months (e.g., 7 years and 7 months is counted as 8 years).