How to Calculate Gratuity in India (15/26 Worked Example)
The exact arithmetic behind India's 15/26 gratuity formula, worked through with a table you can check your own number against.
Working out your India gratuity by hand is straightforward once you know the four inputs and the six-month rounding rule. This step-by-step walkthrough shows the exact arithmetic, then a table of results across different salaries and tenures so you can sanity-check your own number against the India Gratuity Calculator.
Step 1 — Find your "last drawn salary"
Gratuity uses basic salary + dearness allowance (DA) from your final month, not gross pay and not CTC. Check your latest payslip for the "Basic" line and any "DA" line, and add only those two together. If your payslip shows ₹40,000 basic and no separate DA, your figure is ₹40,000.
Step 2 — Count your completed years
Add up your continuous service, then apply the rounding rule: a leftover of more than six months rounds up, six months or less is dropped. Examples:
- 7 years 8 months → 8 years
- 7 years 6 months → 7 years (exactly six months does not round up)
- 7 years 2 months → 7 years
Step 3 — Apply the formula
Gratuity = (Basic + DA) × 15 × completed years ÷ 26
Take an employee with ₹40,000 basic + DA and 10 completed years:
- Daily wage = 40,000 ÷ 26 = ₹1,538.46
- Days of gratuity = 15 × 10 = 150 days
- Gratuity = 1,538.46 × 150 = ₹2,30,769
Step 4 — Apply the ₹20 lakh cap
If the formula result exceeds ₹20,00,000, cap it there — that is both the statutory maximum and the tax-exemption ceiling for non-government employees.
Worked-example table
| Basic + DA / month | Completed years | Days (15 × yrs) | Gratuity |
|---|---|---|---|
| ₹25,000 | 5 | 75 | ₹72,115 |
| ₹40,000 | 10 | 150 | ₹2,30,769 |
| ₹60,000 | 15 | 225 | ₹5,19,231 |
| ₹80,000 | 20 | 300 | ₹9,23,077 |
| ₹1,00,000 | 25 | 375 | ₹14,42,308 |
Every figure above uses (Basic + DA) × 15 × years ÷ 26 and stays below the ₹20 lakh cap. Enter your own numbers on the calculator to confirm.
A quick note on the six-month rule in practice
The rounding rule can meaningfully change your payout at the boundary. An employee on ₹40,000 with 10 years 7 months is treated as 11 years — that is 15 × 11 = 165 days, or ₹2,53,846, roughly ₹23,000 more than the 10-year figure. Timing your last working day around that boundary, where possible, is a legitimate consideration.
For the statutory basis, see the Payment of Gratuity Act, 1972 and the Ministry of Labour & Employment.
Reading your payslip correctly before you start
The single input that most changes your result is "last drawn salary," so it pays to read your payslip precisely. Look only for the lines labelled Basic and Dearness Allowance (DA). Ignore House Rent Allowance (HRA), conveyance, special allowance, medical allowance, LTA and any performance pay — none of those enter the gratuity formula. If your structure folds everything into a single "consolidated" salary with no separate DA, the whole consolidated basic is typically treated as the base; check with HR if your payslip is ambiguous, because getting this figure right matters more than any other step.
Manual check vs the calculator
The arithmetic is easy to verify by hand, which is a good habit before you accept an employer's figure. Compute your daily wage (basic + DA ÷ 26), multiply by 15, multiply by completed years, then cap at ₹20 lakh. If your hand figure and the employer's differ, the usual culprits are (a) the salary base — they may have used only basic where DA also applies, or vice versa; (b) the year count — check whether your part-year crossed the six-month line; or (c) the cap. Cross-check the result on the India Gratuity Calculator, which applies all three rules automatically.
A note on tax at settlement
For non-government employees, the exemption is the lower of the actual gratuity, the formula amount, and ₹20 lakh — and it is a lifetime limit across employers. If you have already claimed part of the ₹20 lakh exemption at an earlier job, less remains exempt now, and the excess is taxed as salary income. This mirrors the lifetime nature of the leave-encashment exemption discussed on the leave-encashment calculator. Keep records of gratuity received at previous jobs so your current settlement is taxed correctly.
Worked check: two employees, same tenure
Consider two colleagues, both with 10 completed years. One has ₹40,000 basic + DA; the other has ₹40,000 gross made up of ₹24,000 basic and ₹16,000 in allowances. The first receives ₹2,30,769; the second, on a ₹24,000 base, receives ₹1,38,462. Same gross, same tenure — very different gratuity, purely because of salary structure. That is why "how much gratuity for 10 years" has no single answer without knowing the basic + DA figure.
Frequently asked questions
What is the gratuity formula with an example?
(Basic + DA) × 15 × completed years ÷ 26. For ₹40,000 basic+DA and 10 years: 40,000 × 15 × 10 ÷ 26 = ₹2,30,769.
Why is 26 used in the gratuity formula?
The 26 represents the assumed number of working days in a month, so dividing monthly salary by 26 gives your daily wage. That daily wage is then multiplied by 15 days per completed year.
Does 4 years 7 months qualify for gratuity?
No. The six-month rounding applies only after you have already crossed the five-year eligibility threshold. You must first complete five years of continuous service; 4 years 7 months does not meet the basic eligibility rule (except on death or disablement).
How much gratuity for 10 years in India?
On ₹40,000 basic+DA it is ₹2,30,769. The general rule is (Basic + DA) × 15 × 10 ÷ 26, capped at ₹20 lakh.
Is DA always included in gratuity?
Yes, where dearness allowance is part of your salary structure it is added to basic for the gratuity calculation. Other allowances such as HRA, conveyance and special allowances are excluded.