Gratuity Calculator
Enter your last drawn basic pay and length of service. You get back the gratuity payable, whether you qualify for it, and how much of it is tax free.
Your details
Gratuity payable
| Basic + DA considered | ₹50,000 |
| Years counted | 10 |
| Formula applied | 15 ÷ 26 |
| Gratuity per year of service | ₹28,846 |
Tax treatment
| Exempt under section 10(10) | ₹2,88,462 |
| Taxable as salary | ₹0 |
The full amount is exempt from tax. The ₹20,00,000 ceiling is a lifetime aggregate across all employers, so factor in any exemption you have already claimed.
This is an estimate for planning. Your final settlement figure depends on your employer's records of continuous service and any contractual terms more generous than the statutory minimum.
What is gratuity?
Gratuity is a lump sum an employer pays for continuous service. In India the Payment of Gratuity Act, 1972 governs it. It is not a bonus, and it is not discretionary. Where the Act applies, it is a legal duty triggered by resignation, retirement, superannuation, death or permanent disablement.
The Act covers every factory, mine, oilfield, plantation, port and railway company. It also covers any shop or firm that employed ten or more people on any day in the past twelve months. Once covered, a firm stays covered even if headcount later drops below ten.
How gratuity is calculated
For employers under the Act, gratuity is fifteen days of wages for each completed year. A month counts as 26 working days, not 30. Wages here mean basic pay plus dearness allowance. Not gross pay, and not CTC.
| Covered by the Act | Not covered by the Act | |
|---|---|---|
| Formula | (Basic + DA) × 15 × Years ÷ 26 | (Basic + DA) × 15 × Years ÷ 30 |
| Days per month | 26 working days | 30 calendar days |
| Part year over 6 months | Rounded up to a full year | Ignored, completed years only |
| Minimum service | 5 years | Per employment contract |
The rounding rule is where hand calculations go wrong most often. Under the Act, 10 years and 7 months counts as 11 years. 10 years and 4 months counts as 10.
What three months of service can cost you
Take an employee on a last drawn basic of ₹50,000, with no dearness allowance, leaving after 10 years and 7 months. The employer is covered by the Act.
The part year runs past six months, so service counts as 11 years. The sum is (₹50,000 × 15 × 11) ÷ 26, which gives ₹3,17,308. That sits well under the ₹20 lakh ceiling, so none of it is taxed.
Now say the same person left after 10 years and 4 months. Service counts as 10 years and gratuity drops to ₹2,88,462. Three months of service makes a difference of nearly ₹29,000.
Who is eligible for gratuity
The general rule is five years of continuous service with one employer. Approved leave, lay-off, a strike or an accident do not break that run. Resigning and re-joining does reset it.
- Five years of continuous service is needed for resignation, retirement or superannuation.
- The five-year rule falls away where the job ends through death or permanent disablement.
- On death, gratuity goes to the nominee or legal heir whatever the length of service.
- Fixed-term and contract staff earn gratuity on the same basis as permanent staff once they meet the service test.
Tax treatment of gratuity
Government employees pay no tax on gratuity at all. For everyone else under the Act, the exemption is the least of three figures: what you actually received, ₹20,00,000, or what the statutory formula gives. Anything above that is taxed as salary. This was section 10(10)(ii) of the Income-tax Act, 1961; since 1 April 2026 it is entry 5 in the table under section 19 of the Income-tax Act, 2025, on the same terms.
The ₹20 lakh ceiling covers your whole career, not each employer. If you already claimed exemption on gratuity from an earlier job, only the unused balance is left for the next one.
When gratuity must be paid
The employer must pay within 30 days of the money falling due, whether or not you asked for it. Miss that window and simple interest runs for the whole delay.
An employer can forfeit gratuity only in narrow cases. Those are wilful damage or loss to employer property, riotous conduct, or an offence involving moral turpitude during the job. Weak performance is not a ground.
Sources
The entitlement, the 15/26 formula and the 30-day payment window come from the Payment of Gratuity Act, 1972. The ₹20 lakh exemption sat in section 10(10) of the Income-tax Act, 1961 and, from 1 April 2026, sits in the table under section 19 of the Income-tax Act, 2025 at entries 5 and 6. The limits are unchanged.
- India Code — Payment of Gratuity Act, 1972indiacode.nic.in
- Central Board of Direct Taxes — Income-tax Act, bare text and section-wise searchincometaxindia.gov.in
This calculator is an estimate, not tax or legal advice. Where a figure here and the statute disagree, the statute governs.
Frequently Asked Questions
How is gratuity calculated in India?
Is gratuity paid before 5 years of service?
Does 4 years and 8 months count as 5 years for gratuity?
Is gratuity calculated on basic salary or gross salary?
How much gratuity is tax-free?
How long does an employer have to pay gratuity?
Can an employer refuse to pay gratuity?
Stop calculating gratuity in spreadsheets
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