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India Gratuity Calculator for Factory Employees

Gratuity is a lump sum an establishment pays when an employee leaves after long service. This calculator applies the statutory 15/26 formula so a plant HR or accounts team can estimate the payout or the annual provision in seconds.

Your numbers

Last drawn monthly wage (Basic + DA)

Basic plus dearness allowance only. Do not include HRA, bonus or overtime.

Completed years of service

years

Extra months beyond completed years

months

More than 6 months is counted as a full year.

Days divisor

Statutory ceiling

Currently Rs 20,00,000 under the Act. Check the latest notification.

Your results

Gratuity payable

Rs 240,000

Zero when the 5-year condition is not met.

Service years counted

Fraction of more than six months rounds up to a full year.

Eligible (5 years or more)

1 means eligible. The 5-year rule is waived on death or disablement.

Gratuity before ceiling

Rs 240,000

Gratuity per year of service

Rs 18,462

Estimate for planning and provisioning. Employment contracts, state rules and the latest notified ceiling govern the actual amount. Consult your labour law adviser.

Save results:

Gratuity payable vs completed years of service

Sweeps Completed years of service from 1 to 40, holding your other inputs fixed.

Automate your year-end gratuity provision

We can build a read-only report from your ERP HR and payroll data to estimate the accrual by employee.

Optional. The tool and every export work without this. No spam.

How to use the gratuity calculator

Enter the last drawn Basic plus DA, the completed years of service and any extra months. The tool rounds service up when the extra months exceed six, checks the five-year eligibility condition and applies the ceiling. The chart sweeps completed years so you can see how the liability grows as long-serving operators and supervisors approach retirement.

Use Basic plus DA only, not gross pay
Set the ceiling to the latest notified figure
Enter 0 extra months when the exit falls on an anniversary

The formula behind it

For employees covered by the Act, gratuity equals last drawn wage multiplied by 15, divided by 26, multiplied by completed years of service. The 26 reflects working days in a month and the 15 is fifteen days of wages per year. Employees not covered by the Act, such as some establishments with fewer than ten staff, use 30 days as the divisor under the usual ex-gratia method.

Worked example

A machinist with Basic plus DA of Rs 32,000 and 12 years 7 months of service counts as 13 years. Gratuity is 32,000 x 15 / 26 x 13 = Rs 2,40,000 approximately. The amount sits well below the Rs 20,00,000 ceiling, so the full figure is payable. Run the chart to see that 25 years at the same wage yields roughly Rs 4,61,500.

Common mistakes and ERP notes

The most frequent error is using gross salary instead of Basic plus DA, which overstates the provision. The second is forgetting that the wage at exit, not the average, drives the formula, so annual revisions raise the whole accrued liability. In SAP, Oracle or SyteLine payroll, keep a separate accrual account and refresh it each year-end from headcount and wage data.

Frequently Asked Questions

Who is eligible for gratuity in a factory?

An employee who has completed five continuous years of service is eligible on retirement, resignation, superannuation, death or disablement. In case of death or disablement the five-year condition does not apply. The Act covers factories, mines, plantations and other notified establishments.

Is gratuity taxable?

For employees covered by the Act, gratuity is exempt from income tax up to the lower of the statutory ceiling, the formula amount and the actual amount received, subject to the latest income tax rules. Amounts above that limit are taxable as salary. Confirm with your tax adviser.

Which wage is used in the formula?

Last drawn Basic salary plus dearness allowance. Commission on sales is included if it is part of wages. HRA, overtime, bonus and one-off allowances are excluded from the wage used in the gratuity formula.

Does the employer need to pay interest on delay?

Yes. The Act requires payment within 30 days of it becoming due. If the employer delays, simple interest at the notified rate is payable from the due date, unless the delay is justified by the employee's own fault.

If you want year-end gratuity provisioning pulled automatically from your ERP payroll and HR tables, we can build a read-only report on your own data.

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