Gratuity Calculator India
Estimate the gratuity amount you are entitled to receive at the time of leaving your job or retirement after 5 years of service.
Gratuity Estimate (2026 Rules)
₹1,44,231
Based on 5 years of service, you qualify under the Payment of Gratuity rules.
Your basic salary is less than 50% of your gross CTC. Under the new wage code rules, your gratuity must be calculated using 50% of your gross salary (₹50,000) instead of your actual basic salary, resulting in a higher payout!
Effective Basic × (15/26) × YearsThe maximum tax-free gratuity limit is ₹25 Lakhs (increased from ₹20 Lakhs). Any excess amount is fully taxable according to your income tax slab.
The Payment of Gratuity Act, 1972
Gratuity is one of the most important components of your retirement or resignation benefits. It is a lump sum amount paid by the company as a token of appreciation for your long-term association.
5-Year Rule
Mandatory continuous service of 5 years is required to qualify for the benefit.
Tax Exemption
Up to ₹20 Lakhs of gratuity is tax-free for private and government employees.
Universal App
Applies to factories, mines, oilfields, plantations, ports, railways, and shops.
How Gratuity is Calculated?
While calculating the number of years of service, any period more than 6 months is rounded off to the next year. For example, if you have served for 6 years and 7 months, the tenure will be considered 7 years.
- Step 1: Identify your last drawn Basic Salary and Dearness Allowance (DA).
- Step 2: Multiply this sum by 15.
- Step 3: Multiply the result by your total years of service.
- Step 4: Divide the final amount by 26.
Gratuity Calculation Formula Explained
The Payment of Gratuity Act, 1972, mandates that every employer with 10 or more employees must pay gratuity. The calculation uses a fraction of 15/26 because a working month is considered to have 26 working days (excluding 4 Sundays).
The formula is: Gratuity = (Basic + DA) × 15/26 × Years of Service. For example, if your Basic+DA is ₹50,000 and you have worked for 10 years, your gratuity = 50,000 × 15/26 × 10 = ₹2,88,461.
Gratuity Tax Exemption Limits 2026
- Government Employees: 100% exempt — no tax on any amount.
- Private Sector (Act-covered): Exempt up to ₹20 lakh. Amount above this is added to income and taxed at slab rate.
- Private Sector (Not Act-covered): Exempt up to the least of: actual gratuity, ₹20 lakh, or half-month salary × years of service.
Key Rules Under Payment of Gratuity Act, 1972
- Applicable to organizations with 10+ employees.
- Minimum 5 years of continuous service required (waived in case of death/disability).
- Payment due within 30 days of last working day.
- Maximum gratuity exempt from tax: ₹20 lakh (enhanced in 2019).
- Forfeiture is allowed only for termination due to moral turpitude or violence.
Frequently Asked Questions
What is Gratuity?
Gratuity is a monetary benefit given by an employer to an employee in recognition of their long and faithful service. It is governed by the Payment of Gratuity Act, 1972.
Who is eligible for Gratuity?
An employee is eligible for gratuity if they have completed 5 years of continuous service with the same employer. This limit is not applicable in case of death or disablement.
How is Gratuity calculated?
The formula is (Last Drawn Basic Salary + DA) * 15/26 * Number of years of service. Here, 26 is considered as the number of working days in a month, and 15 is the number of days for which gratuity is paid for every year of service.
Is there a maximum limit for Gratuity?
Yes, the maximum tax-free gratuity that an employer can pay is ₹20 Lakhs as per the latest government rules (2026). Any amount exceeding this is taxable.
Does Gratuity apply to contract employees?
Yes, if a contract employee is considered an 'employee' of the organization and completes 5 years of continuous service, they are entitled to gratuity.
What is the formula for calculating gratuity?
For employees covered under the Payment of Gratuity Act, the formula is: Gratuity = (Last Drawn Salary × 15/26) × Number of Years Worked. For employees NOT covered by the Act, it is: Gratuity = (Last Drawn Salary × 15/30) × Number of Years Worked. Here, 'Last Drawn Salary' includes Basic + DA.
What is the minimum service period to get gratuity?
An employee must complete a minimum of 5 years of continuous service with the same employer to become eligible for gratuity. However, if an employee dies or becomes disabled, this 5-year rule is waived.
Is gratuity taxable in India?
Gratuity received by a government employee is fully exempt from income tax. For private sector employees, the exemption is the least of: (1) Actual gratuity received, (2) ₹20 lakh (the statutory limit), or (3) Gratuity calculated as per the Act formula. Any amount above the exemption limit is taxable.
Can an employee get gratuity after resignation?
Yes. An employee who resigns after completing 5 or more years of continuous service is entitled to receive gratuity from their employer. The payment must be made within 30 days of the resignation.
What happens if an employer refuses to pay gratuity?
An employee can file a complaint with the Controlling Authority (under the Payment of Gratuity Act) within the jurisdiction of the employer's office. The authority can direct the employer to pay, and failure to comply can lead to fines and imprisonment.