How gratuity is calculated - with worked examples

Gratuity under the Payment of Gratuity Act is 15 days’ wages for every completed year of service, where monthly wages are divided by 26.

Example

Last drawn basic + DA: ₹50,000. Service: 7 years 7 months, which rounds up to 8 years. Gratuity = 15 × 50,000 × 8 ÷ 26 = ₹2,30,769.

Service beyond six months counts as a full year. The payout is capped at the statutory maximum - verify the current cap with your CA.