# The gratuity formula (15/26): what your years of service are worth

> Gratuity is a lump sum paid when you leave a job after five years. The formula is last salary × 15 ÷ 26 × years. At ₹50,000 a month, ten years is about ₹2.88 lakh. Here is where the 26 comes from and what to watch.

Published 2026-10-08 by Toolcloak. 3 minute read. Original: https://toolcloak.pages.dev/articles/gratuity-formula-15-by-26-what-your-years-of-service-are-worth
Related free tool: [Gratuity Calculator](https://toolcloak.pages.dev/tools/gratuity-calculator)

Gratuity is the one part of your pay that grows with loyalty. It is a lump sum your employer pays when you leave, and it depends on only two numbers: your last drawn salary and how long you stayed.

> **In short**
> - Gratuity = **last drawn salary × 15 ÷ 26 × years of service**.
> - Last drawn salary here means **basic plus dearness allowance**, not your full CTC.
> - At ₹50,000 basic, **10 years pays about ₹2.88 lakh**, and 20 years about ₹5.77 lakh.
> - Eligibility normally starts after **5 years** of continuous service. Check the latest rules for exceptions and limits.

## The formula in plain words

> **Gratuity = (last drawn basic + DA) × 15 ÷ 26 × completed years:** The 15 is days of pay for each year of service. The 26 is the number of working days in a month. So you get 15 days of salary for each year you worked.

A part year of more than six months is rounded up to the next full year. So 7 years and 8 months counts as 8 years, while 7 years and 5 months counts as 7.

**Gratuity at a basic salary of ₹50,000 a month**

|  | Value |
| --- | --- |
| 5 yrs | ₹1.44 L |
| 10 yrs | ₹2.88 L |
| 15 yrs | ₹4.33 L |
| 20 yrs | ₹5.77 L |
| 30 yrs | ₹8.65 L |

*Each year adds about ₹28,846. The amount scales straight with years and with salary.*

Try it: [Gratuity Calculator](https://toolcloak.pages.dev/tools/gratuity-calculator). Enter your last basic plus DA and your years of service to see the gratuity.

## Worked example

**₹50,000 basic, 10 years**

| Step | Value |
| --- | --- |
| Last drawn basic + DA | ₹50,000 |
| × 15 ÷ 26 (about 0.577 of a month's pay per year) | ₹28,846 per year |
| × 10 years | ₹2,88,462 |

*The bars are not to scale. The point is the three steps: salary, per-year amount, total.*

## What people get wrong

- **Using CTC.** Only basic and DA count. A big CTC with a small basic means a small gratuity.
- **Counting years that were not continuous.** A real break in service can reset the clock.
- **Assuming everyone gets it.** The formula above applies to employees covered by the Payment of Gratuity Act. Employers not covered by the Act may use their own terms.
- **Forgetting the five-year rule.** There are exceptions, such as death or disablement, but resigning at 4 years 10 months normally means no gratuity.
- **Forgetting the cap and tax rules.** There is a legal ceiling on gratuity and a tax-free limit. Both are set by the government and have been revised before, so check the current figures.

> **Plan around it:** If you are close to five years, compare the gratuity you would gain by staying with what a better offer pays. At a ₹50,000 basic, the five-year mark is worth about ₹1.44 lakh.

Gratuity is one piece of your retirement and exit money. Compare it with what you build yourself in a [monthly SIP](https://toolcloak.pages.dev/articles/5000-rupees-a-month-for-20-years-what-a-sip-calculator-can-tell-you), where years of habit do the same quiet work.

## Frequently asked questions

### What is the gratuity formula?

Last drawn salary (basic plus dearness allowance) × 15 ÷ 26 × number of completed years of service. The 15 is the days of pay per year and 26 is the working days in a month.

### How much gratuity will I get for 10 years at ₹50,000 basic?

About ₹2,88,462.

### Is gratuity payable after 5 years?

Normally yes, after five years of continuous service. There are exceptions, such as death or disablement. Check the latest rules.

### Does CTC count for gratuity?

No. Only the last drawn basic salary plus dearness allowance is used.

### How is a part year counted?

A part year of more than six months is rounded up to a full year. Six months or less is not counted.