📊 Gratuity Calculator
Calculate gratuity under Payment of Gratuity Act | ₹25 lakh max limit
📋 Employment Details
📌 Eligibility
Minimum 5 years of continuous service (waived for death/disability).
📌 Max Limit
₹25,00,000 maximum gratuity under the Act.
📌 Tax Exemption
Govt employees: fully exempt. Others: exempt up to ₹25 lakh.
📌 15/26 Factor
15 days' wages for each year of service, based on 26 working days/month.
📊 Gratuity Results
📌 Gratuity Formula
Covered under Act: Gratuity = Last Salary × 15/26 × Years
Not Covered: Gratuity = Last Salary × 15/30 × Years (i.e., half month per year)
Maximum gratuity: ₹25,00,000
What is Gratuity? – Complete Guide 2026
Gratuity is a lump sum amount paid by an employer to an employee as a token of gratitude for services rendered. It is a retirement benefit governed by the Payment of Gratuity Act 1972. Use the gratuity calculator above to calculate your gratuity amount instantly.
The gratuity calculation depends on your last drawn salary (Basic + DA) and years of service. Gratuity eligibility requires minimum 5 years of continuous service. Gratuity tax exemption is available up to ₹20 lakh under Section 10(10) of Income Tax Act.
Gratuity Calculation Formula
For Employees Covered Under Gratuity Act 1972
Where:
• Last Drawn Salary = Basic Pay + Dearness Allowance (DA)
• 15 = Fixed multiplier (15 days’ wages per year)
• 26 = Working days in a month
• Years = Completed years of service (months > 6 rounded up)
For Employees NOT Covered Under Gratuity Act
Same formula but divided by 30 (calendar days) instead of 26
For Government Employees (Central/State)
Or simplified: (Last Month Salary × Years of Service) × 0.5
Maximum: ₹20,00,000
Gratuity Eligibility Criteria
- Minimum Service: 5 years (4 years 240 days) of continuous service
- Applicable On: Resignation, retirement, superannuation, death, or disablement
- Death/Disability: Gratuity payable even if service less than 5 years
- Covered Establishments: Every factory, mine, oilfield, plantation, port, railway, or establishment with 10+ employees
Gratuity Tax Rules – Section 10(10)
| Employee Type | Tax Exemption | Maximum Limit |
|---|---|---|
| Government Employees Central/State/Local | Fully Exempt | No limit (fully exempt) |
| Private Employees (Covered) Under Gratuity Act 1972 | Exempt up to ₹20 lakh | ₹20,00,000 |
| Private Employees (Not Covered) Not under Gratuity Act | Least of: Actual, Half-month salary per year, ₹20 lakh | ₹20,00,000 |
Example 1: Private Employee (Covered Under Act)
- Last Salary (Basic + DA): ₹60,000
- Years of Service: 15 years
- Gratuity = (60,000 × 15 × 15) ÷ 26 = ₹5,19,231
Example 2: Service with Extra Months
- Last Salary: ₹50,000
- Service: 8 years 7 months (7 months > 6, so rounds to 9 years)
- Gratuity = (50,000 × 15 × 9) ÷ 26 = ₹2,59,615
Payment of Gratuity Act 1972 – Key Points
- Applies to factories, mines, oilfields, plantations, ports, railways
- Applies to shops/establishments with 10 or more employees
- Once applicable, continues even if employees reduce below 10
- Maximum gratuity: ₹20,00,000 (increased from ₹10 lakh in 2019)
- Employer must pay within 30 days of it becoming due
- If delayed, employer pays simple interest at bank rate
- Gratuity can be forfeited only for misconduct causing damage
How to Claim Gratuity
- Submit Form I (Application for Gratuity) to employer within 30 days
- Employer processes and calculates gratuity amount
- Employer issues Form L (Notice for Payment of Gratuity)
- Gratuity must be paid within 30 days
- If dispute, approach Controlling Authority (Labour Commissioner)
Frequently Asked Questions (FAQs)
1. What is gratuity?
Gratuity is a lump sum benefit paid by employer to employee as gratitude for long-term service. It is governed by Payment of Gratuity Act 1972 and payable after 5 years of continuous service.
2. What is the gratuity calculation formula?
Gratuity = (Last Salary × 15 × Years) ÷ 26 for employees covered under the Act. For those not covered, divide by 30 instead. Last salary includes only Basic + DA.
3. What is the minimum service for gratuity eligibility?
Minimum 5 years of continuous service with the same employer. 4 years and 240 days is considered as 5 years. Exception: Death or disability – no minimum required.
4. Is gratuity taxable?
Government employees: Fully tax-exempt. Private employees: Exempt up to ₹20 lakh under Section 10(10). Amount exceeding this is taxable as income.
5. What is the maximum gratuity limit?
Maximum gratuity payable is ₹20,00,000 (₹20 lakh). This was increased from ₹10 lakh w.e.f. March 2019.
6. Can employer refuse to pay gratuity?
No. Gratuity is a statutory right under the Act. However, it can be forfeited (fully/partially) if employee is terminated for misconduct causing damage to employer’s property.
7. What salary components are included in gratuity?
Only Basic Salary + Dearness Allowance (DA) are included. HRA, conveyance allowance, medical allowance, bonus, and other allowances are excluded.
8. Is gratuity paid after resignation?
Yes, gratuity is payable on resignation provided the employee has completed 5 years of continuous service. Submit Form I to employer.
Calculate your gratuity now using the free gratuity calculator above. Understand your retirement benefits as per the Payment of Gratuity Act 1972!