How much gratuity am I owed?

The formula, and the number everyone gets wrong

Section 4(2) of the Payment of Gratuity Act gives you 15 days of wages for every completed year of service. For a monthly rated employee, the Explanation to that subsection says the 15 days are worked out by dividing the last drawn monthly wages by 26 and multiplying by 15.

The divisor is 26, not 30, because the Act treats a month as 26 working days. Using 30 is the single most common mistake in gratuity arithmetic, and it always errs against the employee, by roughly 13 percent.

Five years, and the part year that follows

Gratuity is payable after 5 years of continuous service. There is no proportionate gratuity below that, however close you were. The qualifying test is in completed years, so four years and eleven months does not qualify.

Once you qualify, a part year in excess of 6 months counts as a full year. Note the words "in excess of": exactly 6 months does not round up, 6 months and a day does.

Death or disablement removes the qualifying period entirely. Gratuity is payable however short the service was.

The ceiling, and what it means for tax

Gratuity payable under the Act is capped at ₹20,00,000. That figure is not in the Act text, which still reads ten lakh: it was raised by notification in 2018. The same amount is the exemption limit under section 10(10)(ii) of the Income Tax Act for private sector employees covered by the Act, and it is a lifetime limit across all employers rather than a fresh allowance at each job.

An employer is free to pay more than the Act requires. Anything above the ceiling is taxable as salary, so it lands in the same computation as the rest of your income. Our old versus new regime calculator will show what that costs.

What people get wrong about this

Using gross salary or CTC instead of basic plus DA is the other large error, and it runs the opposite way: it produces a figure well above what you will actually receive. Basic is often only 40 to 50 percent of CTC.

This calculator covers employees covered by the Act. Employees outside it are computed on a different basis, and that basis is not published here because it has not been verified against an official source.