Gratuity Calculator India — Payment of Gratuity Act 1972 (s.4)

How this is calculated

• The formula under s.4 is fifteen days of wages for each completed year of service, taking a month as twenty-six days: (15 × last drawn wages × years) ÷ 26.
• Last drawn wages means basic pay plus dearness allowance, not gross salary. Using gross is the usual reason a computed figure comes out too high.
• A part-year of more than six months counts as a full year. Six months or less does not.
• Five years of continuous service is the eligibility condition, and it does not apply where employment ends by death or disablement.
• The amount payable is capped at Rs 20,00,000 under s.4(3).

The provision this implements

• Section 4, Payment of Gratuity Act, 1972 — Fifteen days of wages for every completed year on a twenty-six day month, capped at ₹20 lakh.

• Section 4, Payment of Gratuity Act

Statutory Gratuity Entitlement Matrix (15/26 Formula on ₹50,000 Last Drawn Basic + DA)

Worked example

For an employee whose last drawn basic plus dearness allowance was ₹50,000, with 10 completed years of service: 15 × ₹50,000 × 10 ÷ 26 = ₹2,88,462. Wages here means basic plus DA, not gross — using gross is the usual reason a figure comes out too high.

Common questions

How is gratuity calculated in India?

Under section 4 of the Payment of Gratuity Act, 1972 the formula is fifteen days of wages for every completed year of service, on a twenty-six day month: (15 × last drawn wages × years of service) ÷ 26. Last drawn wages means basic plus dearness allowance, and a part-year over six months is counted as a full year.

What is the minimum service for gratuity?

Five years of continuous service. The condition does not apply where employment ends because of the employee's death or disablement, in which case gratuity is payable regardless of the length of service.

What is the maximum gratuity payable?

Rs 20,00,000 under section 4(3) of the Act. Anything computed above that ceiling is not payable as statutory gratuity, though an employer is free to pay more as a contractual benefit.

When must gratuity be paid?

Within 30 days of it becoming payable, under section 7(3). If the employer does not pay in that period, section 7(3A) makes it liable for simple interest for the period of delay.

How is gratuity calculated in days?

The Payment of Gratuity Act calculates entitlement per year, not per day. Each completed year of service earns fifteen days of wages. For a monthly-paid employee, the daily wage equivalent is last drawn basic+DA divided by 26 (the statutory working-day month), and fifteen such days per year gives the formula (15 × wages × years) ÷ 26.

How many months of salary is gratuity?

Approximately half a month's wages per year of service — fifteen days out of twenty-six working days is about 57.7% of a month. For ten years of service the gratuity works out to roughly 5.77 months of basic plus DA, subject to the Rs 20 lakh cap. The exact formula is (15 × wages × years) ÷ 26.

How is gratuity calculated in months?

Service years are counted in completed years, with a part-year of more than six months rounding up to a full year. The gratuity amount is fifteen days of wages per year — which translates to approximately 0.577 months of basic+DA per year of service. The formula is (15 × last drawn wages × counted years) ÷ 26.

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