About the gratuity calculator
Gratuity is the payment your employer owes you for having stayed. Under the Payment of Gratuity Act, 1972 it becomes payable after five years of continuous service and is calculated as fifteen days' pay for every year you worked. The formula looks simple and still trips people up twice over.
The first trap is the divisor. Fifteen days' pay is worked out as your monthly salary divided by twenty-six, not thirty, because the Act counts working days rather than calendar days. That makes a day's pay about 15% larger than the intuitive figure, so the answer is higher than most people first calculate — assuming their employer falls under the Act. An employer outside it uses thirty, and the same service is worth roughly 13% less.
The second trap is the salary itself. It is basic plus dearness allowance only. HRA, special allowance, bonus, and everything else that makes up your gross are excluded. Since basic is often only 40% to 50% of CTC, the gratuity on a large salary can look surprisingly small, and that is the rule working as intended rather than an error.
Part-years round, but only under the Act, and only from six months. Seven years and seven months counts as eight; seven years and four months counts as seven. Note that this rounding governs what you are paid, not whether you qualify — four years and eleven months rounds to five for the formula but is still short of the five-year gate, so nothing is payable. The gate itself is waived entirely on death or permanent disablement, at any length of service.
On tax, the exemption under section 10(10) is the least of three figures: twenty lakh, what you actually received, and what the formula produces. Anything above that is taxed as salary. The twenty lakh is a lifetime ceiling across your whole career rather than a fresh allowance at each employer, which matters if you have taken gratuity before.