What this calculator does
Gratuity is a statutory monetary benefit provided by employers to employees under the Payment of Gratuity Act, 1972 as a reward for long-term continuous service.
Formula & Mathematical Logic
Gratuity = (15 × Last Drawn Monthly Basic+DA × Completed Years) ÷ 26
Last drawn monthly basic salary including Dearness Allowance (DA), completed years of continuous service (minimum 5 years for eligibility).
How WealthAura calculates this
For covered employees, one month is treated as 26 working days. Gratuity is calculated at 15 days of wages for every completed year of service (any period over 6 months counts as a full year). Statutory tax exemption is capped at ₹20,00,000 under Section 10(10).
Worked example
An employee with 10 years of service and last drawn basic salary of ₹60,000 receives (15 × 60,000 × 10) ÷ 26 = ₹3,46,154, all of which is 100% tax-free.
Input sensitivity & what changes
For non-covered employees, the formula divides by 30 calendar days instead of 26 working days, yielding a slightly lower payout.
How to interpret the result
Clarifies terminal compensation when resigning, changing employers, or retiring after 5+ years of continuous service.
Key factors that influence the outcome
Continuous service duration, forfeiture clauses for misconduct, and whether the employer provides a higher contractual gratuity than the statutory minimum.
Common calculation mistakes to avoid
Including variable bonuses or HRA in the basic salary figure (only Basic Salary + DA are counted), or assuming gratuity is payable before completing 5 years.
Underlying assumptions & legal caveats
Employee has completed minimum 5 continuous years of service (except in cases of death or disablement where 5-year requirement is waived).
Read the related guide →