Gratuity Calculator (India)
Compute gratuity payable under the Payment of Gratuity Act, 1972. Eligibility kicks in after 5 years of continuous service (relaxed to 4 years 240 days by Madras HC). Tax-free up to ₹20 lakh under Sec 10(10).
Inputs
Formula used: ₹50,000 × 15 / 26 × 7 years
The 15/26 formula
Gratuity = (Last drawn Basic + DA) × 15 / 26 × completed years of service.
The 15/26 represents 15 days of wages for every year worked, with 26 treated as the working days in a month (excluding weekly off). Years of service are rounded up if the remainder is 6 months or more (e.g., 7 years 6 months = 8 years for gratuity purposes).
When is gratuity payable
- Resignation, retirement, or superannuation after 5+ years
- Death or permanent disability — 5-year rule waived; even less service triggers gratuity
- Termination by employer (not for misconduct involving moral turpitude)
Tax treatment under Sec 10(10)
- Government employees: entire gratuity is tax-free, no upper limit.
- Private sector: tax-free up to lower of (a) actual gratuity received (b) 15/26 × last drawn × years (c) ₹20 lakh lifetime cap.
- The ₹20 L cap applies cumulatively across all employers in your career.
Frequently asked questions
Is 4 years 11 months enough for gratuity?▾
Strictly under the Act, 5 full years of continuous service. However, several court rulings (notably Madras HC) have held that 4 years and 240 days in the 5th year qualifies. Many employers follow this interpretation. Confirm with HR — a written policy may exist.
Is gratuity calculated on Basic only or Basic + DA?▾
Basic + Dearness Allowance only. Other allowances like HRA, special allowance, or conveyance are NOT included in the gratuity calculation, even though they appear on your payslip.
What if my company isn't covered under the Gratuity Act?▾
Companies with fewer than 10 employees aren't legally required to pay gratuity. Some pay it as ex-gratia goodwill; others don't. Check your offer letter or employment agreement for any contractual gratuity clause.
How is gratuity taxed if it exceeds ₹20 lakh?▾
The amount above ₹20 L (lifetime cap) is added to your salary income and taxed at your slab rate in the year of receipt. The tax-free ₹20 L is also a CUMULATIVE limit — if you've already used it from a previous employer, the next gratuity is fully taxable.
Can my employer refuse to pay gratuity if I resign?▾
No, if you've completed 5 years (or are otherwise eligible). Refusal is a violation of the Act, punishable with fine and imprisonment up to 6 months. You can file a claim with the Controlling Authority under the Act if your employer doesn't pay within 30 days of becoming due.