How Gratuity Is Calculated in India

What Is Gratuity?

Gratuity is a lump-sum amount paid by an employer to an employee who has completed a minimum period of continuous service. It is governed by the Payment of Gratuity Act, 1972.

Gratuity Calculation Formula

Understanding the Formula

Last drawn salary includes basic salary and dearness allowance. Years of service are rounded up to the nearest completed year if service exceeds six months.

Example Gratuity Calculation

• Last drawn basic salary + DA: ₹30,000
• Total years of service: 10 years
• Calculation: (30,000 × 10 × 15) ÷ 26
• Gratuity amount: ₹1,73,077 (approximately)

Factors That Affect Gratuity Amount

Gratuity depends on last drawn salary, total years of service, and whether the employee is covered under the Gratuity Act. Salary hikes and longer service increase gratuity benefits.

Use the Gratuity Calculator

Use the Gratuity Calculator above to estimate how much gratuity you may receive based on your salary and service period.