Gratuity is a monetary benefit given by an employer to an employee for rendering services for a continuous period of 5 years or more. It is governed by the Payment of Gratuity Act, 1972.
Formula
For employees covered under the Act:
Gratuity = (15 * Last Drawn Salary * Years of Service) / 26
For employees NOT covered under the Act:
Gratuity = (15 * Last Drawn Salary * Years of Service) / 30
*Salary includes Basic Pay + Dearness Allowance (DA).