Gratuity Formula Under Payment of Gratuity Act, 1972
| Organisation Type | Formula | Max Limit |
|---|---|---|
| Covered (10+ employees) | (Basic+DA) × 15 ÷ 26 × Years | ₹20 Lakh |
| Non-covered / Ex-Gratia | (Basic+DA) × 15 ÷ 30 × Years | As per policy |
* 26 = 4 weeks × 6.5 working days. Gratuity becomes due within 30 days of separation. Employer must pay interest at 10% p.a. on delayed payment. Nominee gets gratuity in case of death during service.
Frequently Asked Questions
Formula: Gratuity = Last Basic Salary × 15/26 × 20. For example: ₹60,000 Basic × 15/26 × 20 = ₹6,92,308. The "26" represents 26 working days in a month (6 days/week standard). This is the statutory formula under the Payment of Gratuity Act for covered organisations.
Yes — resignation, retirement, death, disability, or retrenchment all qualify for gratuity after 5 years of continuous service. There is no distinction between types of separation for gratuity eligibility under the Act.
Gratuity can be forfeited (partially or fully) only if the employee is dismissed for acts involving moral turpitude, willful omission, or damage to property. It cannot be forfeited for ordinary misconduct or performance issues.