Gratuity Calculator

Gratuity (also called end-of-service benefit, severance pay, or service gratuity) is a lump-sum payment made by an employer to an employee upon resignation, retirement, or termination after completing a qualifying period of service. It is legally mandated in many countries and is separate from provident fund contributions.

India — Payment of Gratuity Act 1972 formula: Gratuity = (Last Drawn Salary × 15 × Years of Service) ÷ 26

Where:

• Last Drawn Salary = Basic Pay + Dearness Allowance (DA) — NOT total gross salary
• 15 = 15 working days’ worth of salary per year of service
• 26 = working days in a month (full calendar month 30 days minus 4 Sundays)
• Years of Service — rounded to nearest half-year for partial years above 6 months; minimum 5 years for eligibility

Gratuity ceiling (India, 2024): Maximum tax-exempt gratuity: ₹20 lakh (₹2,000,000). Amount above this is taxable.

UAE end-of-service gratuity (Labor Law):

• Less than 1 year: no gratuity
• 1–5 years: 21 days’ basic salary per year
• Above 5 years: 30 days’ basic salary per year (for years beyond 5)

Formula (UAE): Gratuity = (Basic Salary ÷ 30) × 21 × Years (for first 5 years) + (Basic Salary ÷ 30) × 30 × Additional Years (beyond 5)

Saudi Arabia GOSI end-of-service:

• Employer-funded: 1/3 month salary per year for first 5 years; 2/3 per year from 5–10 years; full month per year beyond 10 years.

Resignation vs. termination (India): Gratuity is payable upon resignation after 5+ years. If terminated without cause, gratuity is payable regardless of service duration under some state laws.

Worked example — India: Employee details: Basic salary ₹45,000/month, DA ₹5,000/month, total service 12 years and 7 months (rounds to 13 years).

• Eligible salary: ₹45,000 + ₹5,000 = ₹50,000
• Gratuity: (₹50,000 × 15 × 13) ÷ 26 = (₹9,750,000) ÷ 26 = ₹375,000
• Tax status: ₹375,000 < ₹2,000,000 ceiling → fully tax-exempt

Worked example — UAE: Basic salary: AED 8,000/month. Service: 7 years (5 years + 2 additional).

• First 5 years: (8,000 ÷ 30) × 21 × 5 = 266.67 × 21 × 5 = AED 28,000
• Next 2 years: (8,000 ÷ 30) × 30 × 2 = 266.67 × 30 × 2 = AED 16,000
• Total gratuity: AED 44,000 ≈ USD 11,980