How gratuity is calculated in India
Gratuity is a lump-sum reward for long service, paid on retirement, resignation after five years, death or disablement. Government and private employees use two different statutory formulas, and this calculator applies the correct one for your employment type.
Government employees — CCS (Pension) Rules
Retirement gratuity equals one-fourth of emoluments (last drawn basic pay plus dearness allowance) for every completed six-monthly period of qualifying service. The maximum is 16.5 times emoluments, subject to the ₹25 lakh ceiling that applies from 1 January 2024.
Private employees — Payment of Gratuity Act, 1972
Gratuity equals last drawn monthly wages (basic + DA) multiplied by 15/26 for each completed year of service. The 26 represents working days in a month and 15 represents half a month's wages. The tax-free ceiling is ₹20 lakh.
Rounding of service length
Under the Gratuity Act, service of more than six months in the final year counts as a full year — 10 years 7 months is treated as 11 years. Government rules count service in completed six-month blocks instead.
Effect of the 8th Pay Commission
Because gratuity is based on last drawn basic pay, anyone retiring after 8th CPC implementation gets gratuity on the revised basic. At a 2.86x fitment factor the gratuity of a Level 10 officer would rise in the same proportion, subject to the ceiling.