💼 Gratuity Calculator India
Calculate your gratuity payout under the Payment of Gratuity Act 1972.
What Is Gratuity?
Gratuity is a lump-sum payment made by an employer to an employee as a token of gratitude for continuous service. It is governed by the Payment of Gratuity Act, 1972, which applies to organisations employing 10 or more persons. Gratuity is payable when an employee leaves after completing at least 5 years of continuous service — whether on resignation, retirement, death, or disablement.
Gratuity Formula
For employees covered under the Gratuity Act:
For employees NOT covered under the Act:
Where Last Drawn Salary = Basic Salary + Dearness Allowance (DA). The divisor 26 represents the number of working days in a month (excluding 4 Sundays), and 15 represents 15 days of salary per year of service.
Worked example: An employee with Basic + DA of ₹50,000/month and 8 years 7 months of service (rounds up to 9 years), covered under the Act: Gratuity = (50,000 × 15 × 9) ÷ 26 = ₹2,59,615.
Maximum gratuity: ₹20,00,000 (₹20 lakh). This limit was revised in 2018. Any gratuity exceeding this amount is fully taxable.
Gratuity Tax Rules 2026
- Government employees: Gratuity received is fully exempt from income tax.
- Private sector (covered under Gratuity Act): Exempt up to the least of: actual gratuity received, ₹20 lakh, or 15 days' salary for each completed year of service.
- Private sector (not covered under Act): Exempt up to the least of: actual gratuity, ₹20 lakh, or half month's average salary for each completed year.
- Above ₹20 lakh: Taxable as income in the year of receipt.
Related Tools
- Income Tax Calculator India 2026-27 — calculate tax on your gratuity and salary
- NPS Calculator — plan retirement corpus alongside gratuity
- Net Worth Calculator — add gratuity to your asset tracking
Frequently Asked Questions
What is the minimum service required to get gratuity?
5 years of continuous service. However, in cases of death or disablement, the 5-year requirement is waived and gratuity is paid to the nominee or legal heirs regardless of tenure. Some courts have also upheld that 4 years and 240 days (in a 6-day work week organisation) counts as completing 5 years.
How is partial year service counted for gratuity?
If the remaining months after full years exceed 6 months, it rounds up to the next year. If 6 months or less, it is ignored. Example: 8 years 7 months → 9 years. 8 years 4 months → 8 years.
What components of salary are included in gratuity calculation?
Only Basic Salary and Dearness Allowance (DA) are included. HRA, conveyance allowance, special allowances, bonus, commission and other components are excluded. For most private sector employees, DA is zero — so only basic salary applies.
Is gratuity compulsory for all employers?
The Payment of Gratuity Act is mandatory for organisations employing 10 or more persons. Once an organisation crosses this threshold, the Act continues to apply even if headcount later falls below 10. Smaller organisations are not legally required to pay gratuity but may choose to do so voluntarily.
What is the maximum gratuity limit in 2026?
The maximum gratuity exempt from tax is ₹20 lakh (₹20,00,000). This was revised from ₹10 lakh to ₹20 lakh in March 2018. The government has the power to increase this limit by notification, so check for any upward revisions for the current financial year.
When is gratuity payable after resignation?
Gratuity is payable within 30 days of it becoming due. After an employee's separation, the employer must pay within 30 days. If there is a delay, the employer must pay simple interest at the rate prescribed by the government from the due date. Wilful non-payment is punishable with imprisonment and fine.
Can gratuity be forfeited?
Yes, partially or wholly. Gratuity can be forfeited if the employee is terminated for proven misconduct involving moral turpitude or if the employee causes damage to property — to the extent of the damage caused. Forfeiture for other reasons (performance, cost-cutting) is not permitted under law.
Is gratuity paid on death of an employee?
Yes. In case of the death of an employee, gratuity is paid to the nominee or, if no nomination was made, to the legal heirs. The 5-year minimum service requirement is waived in the case of death or total disablement due to accident or disease.
How do I claim gratuity from my employer?
Submit Form I (Application for Gratuity by an Employee) to your employer or the controlling authority within the prescribed time. The employer must determine the amount payable and give notice within 15 days. Payment must follow within 30 days of the due date.
Does gratuity count towards EPF or pension calculations?
No. Gratuity is a separate statutory benefit independent of EPF, EPS (Employee Pension Scheme) and NPS. It is funded by the employer either through a gratuity fund (managed by an insurer like LIC) or paid directly from company funds at the time of settlement.