PF/Gratuity Calculator

What is Gratuity?

Gratuity is a lump sum payment made by an employer to an employee as a token of appreciation for their long-term service. In India, gratuity is governed by the Payment of Gratuity Act, 1972, and is a key component of retirement benefits for salaried employees. It's commonly used to provide financial security after leaving a job, retirement, or in the event of disability or death.

How to Use the PF/Gratuity Calculator

Type your Basic Salary and Dearness Allowance (DA) in the input boxes.
Type your Years of Service (completed years with your employer).
Select your Currency and Type of Organization (Government or Private).
Choose whether your company is covered under the Gratuity Act.
Click Calculate Gratuity to see your gratuity amount, eligibility, and taxability. The How To Calculate PF/Gratuity Calculator is free, accurate, and easy to use for all Indian employees.

How is Gratuity Calculated? (Formula Explained)

The standard formula for gratuity (for companies covered under the Act) is:

Gratuity = (Basic Salary + Dearness Allowance) × 15 × Years of Service / 26

Basic Salary: Last drawn basic monthly salary
Dearness Allowance (DA): Cost of living adjustment allowance
15: Number of days salary per year of service
Years of Service: Completed years with the employer
26: Number of working days in a month (as per Act)

For companies not covered under the Act, the formula may differ (often: half month salary × years of service).

Example: Gratuity Calculation Step-by-Step

Suppose Priya's last drawn basic salary is ₹50,000, DA is ₹5,000, and she has worked for 7 years in a private company covered under the Act:

Basic Salary: ₹50,000
DA: ₹5,000
Years of Service: 7

Gratuity = (50,000 + 5,000) × 15 × 7 / 26 = ₹220,384.62

Priya's estimated gratuity is ₹220,384.62.

Why Gratuity Matters for You

Provides financial security after retirement or job change
Acts as a reward for long-term service and loyalty
Helps in planning for future expenses and emergencies
Mandatory for eligible employees under Indian law
Tax benefits up to the prescribed limit

Normal / Optimal / Average Ranges

Eligibility: Minimum 5 years of continuous service
Maximum Gratuity: ₹2,000,000 (as per 2024 law for covered companies)
Tax Exemption: Up to ₹2,000,000 (subject to change by government)
Calculation: Based on last drawn salary and years of service

Benefits of Tracking Your Gratuity

Helps you plan for retirement and major life events
Enables better negotiation with employers
Ensures you receive the correct amount as per law
Assists in tax planning and financial management
Free and accessible online with How To Calculate's tool

Limitations of This Calculator

Assumes all inputs are accurate and as per latest law
Does not account for special cases (e.g., death, disability, partial years)
May not reflect company-specific policies or exceptions
Results are estimates—consult your HR or financial advisor for exact figures

FAQs About the PF/Gratuity Calculator

Is gratuity taxable?
Gratuity is tax-free up to ₹2,000,000 for employees covered under the Act. Amounts above this may be taxable as per income tax rules.
Who is eligible for gratuity?
Employees with at least 5 years of continuous service in an organization are eligible, except in cases of death or disability.
How is gratuity calculated for government employees?
Government employees may have different rules, but the formula is generally similar. Check with your HR department for details.
Can I get gratuity if I resign before 5 years?
Generally, no. However, exceptions exist for death or disability.
What if my company is not covered under the Gratuity Act?
The formula may differ, and there may be no statutory maximum. Check your company's policy.
Is DA included in gratuity calculation?
Yes, Dearness Allowance is included for companies covered under the Act.
How often should I check my gratuity?
Check whenever your salary or years of service change, or before leaving a job.
What documents are needed to claim gratuity?
Typically, you need your service certificate, salary slips, and a gratuity claim form.