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Step-by-Step Gratuity Calculator
Enter Basic salary, DA, and service dates. The sheet auto-calculates completed years (with 6-month rounding per Section 4(2)), applies the formula, and caps at ₹20,00,000.
Gratuity Calculation Template Free Excel for Indian Businesses
Enter Basic salary and service dates. Get the exact gratuity amount under the Payment of Gratuity Act, 1972. Eligibility check, tax exemption breakup, and team view for 25 employees. Updated June 2026.
- Auto-calculates gratuity with the (Basic x 15 x Years) / 26 formula
- Checks eligibility, applies the 6-month rounding rule, and caps at ₹20,00,000
- Team view for 25 employees with total gratuity liability
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Petpooja presents
Gratuity Calculation Template
For Indian Businesses
5
Sheets · Excel template
FY 2025-26
What's Inside
Everything you need for accurate gratuity calculation.
02
Eligibility Check
Automatic check for the 5-year minimum service rule. Handles exceptions too: if exit reason is death or disability, gratuity is payable regardless of service length (Section 4(1)).
03
Tax Exemption Breakup
Shows how much of the gratuity is tax-exempt under Section 10(10) of the Income Tax Act. Different rules for government employees, employees covered under the Act, and those not covered.
04
Team View (25 Employees)
Calculate gratuity for up to 25 employees in one sheet. See total gratuity liability, count of eligible vs. ineligible employees, and per-person amounts at a glance.
05
Quick Reference Guide
All the rules in one sheet: eligibility criteria, forfeiture conditions, tax treatment by employee category, payment timelines, and key legal references with section numbers.
06
Worked Example
A complete step-by-step example showing gratuity calculation for a restaurant manager with 8 years 7 months of service. Every number explained, every formula visible.
Why This Matters
The Gratuity Question Every Indian Employer Gets Wrong
An employee walks in after 7 years and says, "I'm resigning. What's my gratuity?" You pull up a calculator, multiply some numbers, and hope you've got it right. Honestly? Most employers don't.
The Payment of Gratuity Act, 1972 covers every establishment with 10 or more employees. That's most restaurants, retail stores, factories, and offices in India. Yet the formula trips people up constantly. Our detailed gratuity guide walks through the law section by section.
Here's the problem. The formula itself looks simple: (Last Drawn Salary x 15 x Completed Years) / 26. But "Last Drawn Salary" means Basic + Dearness Allowance only, not gross salary. "Completed Years" follows a special rounding rule where 6+ remaining months count as a full year. And the whole thing caps at ₹20,00,000 per the 2018 amendment.
Get any of those three wrong, and you either overpay or underpay. Underpaying is worse. Section 7(3A) of the Act says the employer must pay gratuity within 30 days. Delay it, and you owe 10% simple interest per annum from the due date. When an employee exits, gratuity is just one part of the settlement. The free F&F calculator helps you get the full picture.
This template does the calculation correctly every time. Enter the dates and salary, and it handles the rounding, the cap, the eligibility check, and even the tax exemption under Section 10(10). If you're settling all dues at once, pair it with our Full & Final Settlement Calculator.
Sample Preview
What the template shows for an employee with 8 years of service.
Here's a preview of what you'll get inside:
Monthly Basic + DA: ₹25,000 (₹22,000 Basic + ₹3,000 DA). Only these two components count for gratuity, not gross salary.
Service: 8 years, 7 months. Since 7 months exceeds 6, it rounds up to 9 completed years per Section 4(2).
Gratuity formula: (₹25,000 x 15 x 9) / 26 = ₹1,29,808. Shown step-by-step with each intermediate value.
Cap check: ₹1,29,808 is below the ₹20,00,000 ceiling. Full amount payable.
Tax: Fully exempt under Section 10(10)(ii) since it's below ₹20,00,000. Taxable portion = ₹0.
... plus eligibility check, forfeiture rules, team view for 25 employees, and a quick reference guide with all legal citations.
Key Stats
Why gratuity accuracy matters.
₹20L
Maximum gratuity payable under the Act. This ceiling was raised from ₹10,00,000 to ₹20,00,000 by the 2018 amendment (effective 29-Mar-2018). Any gratuity above this is taxable.
Source: Payment of Gratuity (Amendment) Act, 2018, Section 4(3)10%/year
Simple interest the employer must pay if gratuity is delayed beyond 30 days of it becoming due. The clock starts from the employee's last working day.
Source: Payment of Gratuity Act, 1972, Section 7(3A)30 days
The deadline for paying gratuity after it becomes payable. If the employer delays beyond this, the employee can approach the Controlling Authority under Section 7 of the Act.
Source: Payment of Gratuity Act, 1972, Section 7(3) and 7(3A)
Common Mistakes
6 Gratuity Mistakes Indian Employers Make
01
Calculating on gross salary instead of Basic + DA
The Act says "last drawn salary" which means Basic wages plus Dearness Allowance. HRA, conveyance, special allowance, and other components don't count. If you're unsure how salary components work, that's worth reading first.
02
Ignoring the 6-month rounding rule
Section 4(2) states: if an employee has worked for more than 6 months beyond completed years, it rounds up. So 4 years 7 months = 5 completed years. Miss this, and you shortchange the employee.
03
Refusing gratuity when an employee dies before 5 years
Section 4(1) is clear: in case of death or disablement, the 5-year minimum doesn't apply. Gratuity is payable to the nominee regardless of service length. Many employers don't know this.
04
Forfeiting gratuity without due process
Even when an employee is terminated for misconduct, gratuity can only be forfeited (partially or fully) under Section 4(6). The employer must issue a show-cause notice and follow procedure. You can't just decide to not pay.
05
Using 30 instead of 26 as the divisor
The formula divides by 26, not 30. The 26 represents working days in a month (excluding 4 Sundays). Using 30 reduces the gratuity amount and is technically non-compliant.
06
Not applying the ₹20,00,000 cap
Since the 2018 amendment, the maximum gratuity is ₹20,00,000. For long-serving senior employees with high salaries, the calculated amount can exceed this. The excess is taxable income.
Comparison
Gratuity: Manual Calculation vs This Template.
| Aspect | Manual Calculation | With This Template |
|---|---|---|
| Time per employee | 10-15 minutes (with research) | Under 30 seconds |
| 6-month rounding | Often forgotten or miscalculated | Auto-applied per Section 4(2) |
| ₹20L cap check | Sometimes missed for senior staff | Automatically enforced |
| Death/disability exception | Rarely known by HR teams | Built into eligibility logic |
| Tax exemption | Requires separate IT Act lookup | Auto-calculated for all 3 employee categories |
| Bulk calculation | One employee at a time | 25 employees in Team View sheet |
| Legal references | Need to look up each section | Quick Reference sheet with all citations |
Stop guessing the gratuity amount.
Download the free Gratuity Calculation Template and get the exact number in 30 seconds.
FAQ
Frequently asked questions.
How is gratuity calculated in India?
For employees covered under the Payment of Gratuity Act, 1972, the formula is: Gratuity = (Last Drawn Salary x 15 x Completed Years of Service) / 26. "Last Drawn Salary" means Basic pay plus Dearness Allowance. The 15 represents 15 days' wages per year of service. The 26 represents working days in a month. The maximum gratuity payable is ₹20,00,000. For a deeper walkthrough, see our salary structure as per labour law guide.
Who is eligible for gratuity?
Any employee who has completed 5 or more years of continuous service is eligible. The Act applies to factories, mines, oilfields, plantations, ports, railways, and shops or establishments with 10 or more employees. Two exceptions exist: if the employee dies or becomes disabled during service, gratuity is payable regardless of how many years they've completed (Section 4(1)). Establishments must also maintain PF and ESI compliance alongside gratuity.
What does the 6-month rounding rule mean?
Under Section 4(2), if an employee has worked for more than 6 months beyond their completed years, those extra months count as a full additional year. For example, 7 years and 8 months of service counts as 8 completed years for gratuity calculation. But 7 years and 4 months stays at 7 completed years. Want a quick number before downloading? Try our free online gratuity calculator.
Is gratuity taxable?
Under Section 10(10) of the Income Tax Act, gratuity received is exempt up to ₹20,00,000 for employees covered under the Gratuity Act. For government employees, the full amount is exempt with no upper limit. Any amount exceeding the exemption limit is added to the employee's taxable income for that financial year. Use our CTC calculator to see how gratuity fits into the overall salary structure.
Can an employer forfeit gratuity?
Yes, but only under Section 4(6) of the Act. Gratuity can be forfeited if the employee's service was terminated for an offence involving moral turpitude (only if convicted). It can also be forfeited to the extent of damage caused if terminated for misconduct that resulted in loss or damage to employer property. The employer cannot arbitrarily refuse payment. For more on the full and final settlement process, see our glossary.
About Petpooja
Petpooja is India's leading SME business software suite, trusted by 1,50,000+ businesses across restaurants, retail, healthcare, manufacturing, and more. From billing and payroll to task management and procurement, Petpooja helps Indian businesses run better, every day.
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