A worked example: ₹60,000 last drawn, 12 years of service
An employee with a last drawn monthly salary (Basic + DA) of ₹60,000 and exactly 12 years of service receives a gratuity of ₹4,15,384.62 — well under the statutory ceiling.
The formula: 15 × salary × years ÷ 26
The Payment of Gratuity Act, 1972 formula is (15 × last drawn monthly salary × years of service) ÷ 26: ₹60,000 × 15 × 12 ÷ 26 = ₹4,15,384.62. The 26 represents working days in a month (30 calendar days minus 4 Sundays), the same convention used for several other Indian statutory payroll calculations.
Rounding years of service: 6 months tips the scale
The Act rounds part-years to the nearest whole year using a 6-month threshold. 12.6 years of service rounds up to 13 years, raising the same ₹60,000 salary's gratuity to ₹4,50,000. But 12.4 years rounds back down to 12 years, giving the identical ₹4,15,384.62 as exactly 12 years — the extra 4.8 months of service adds nothing until it crosses the 6-month mark.
Hitting the cap: ₹1,50,000 last drawn, 35 years of service
A higher earner with ₹1,50,000 last drawn and 35 years of service would raw-calculate to ₹30,28,846.15 (15 × 1,50,000 × 35 ÷ 26) — but the statutory ceiling of ₹20,00,000 caps the actual gratuity at exactly ₹20,00,000 instead.