Gratuity formula under the Payment of Gratuity Act (estimate only)
The estimate most private employees hear
Where the Payment of Gratuity Act applies, a widely used estimate is fifteen days’ wages for each completed year of service, with wages often taken as last drawn basic plus DA, and a month treated as twenty-six working days—hence the 15/26 style formula. Rounding of partial years and wage definitions follow the Act and employer practice. Government and some other employments use different patterns.
Coverage and caps before you celebrate
Not every workplace is covered the same way; headcount and establishment rules matter. Statutory caps and employer policies can limit the payable amount. The gratuity calculator on this site turns wages and years into a planning number—it is not HR’s final worksheet or a legal opinion.
Tax is a separate step
Exemption limits and taxability depend on your facts and the Income-tax provisions for the year of receipt. Use the estimate to size cash at exit, then read the settlement and Form 16 with a professional if the amount is large. Do not confuse this formula with leave encashment maths.
Results from FinanceChacha are estimates for planning, not financial or tax advice. Read the disclaimer.
Try the calculator
Open the calculator this guide refers to and run your own numbers.