Gratuity Formula Explained — How It's Calculated
Gratuity = (Last drawn salary × 15 × Years of service) ÷ 26. "Salary" means basic + DA only. "15" represents 15 days of salary. "26" is the working days in a month. Example: ₹60K × 15 × 8 ÷ 26 = ₹2,76,923.
Basic + Dearness Allowance only
Gratuity Amount
₹3,69,231
Tax-Free Amount
₹3,69,231
Up to ₹20L tax-free under Section 10(10)
Formula: (Last Salary × 15 × Years) ÷ 26. Capped at ₹20 lakh for employees covered under the Payment of Gratuity Act, 1972.
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Common questions about Gratuity Formula Explained — How It's Calculated
Why is gratuity divided by 26?
26 represents the number of working days in a month (30 days minus 4 Sundays). The formula pays 15 days of salary per year of service, so: (monthly salary × 15 days) ÷ 26 working days = half-month's pay per year served.