Gratuity Calculator India (2026)
Calculate statutory gratuity payout and tax-exempt amount under the Payment of Gratuity Act, 1972.
Monthly basic pay plus dearness allowance (excludes allowances & bonus)
Full continuous years served with the organization (Min 5 years for eligibility)
Service beyond full years (Months > 6 rounds up to next full year)
Gratuity is 100% tax-exempt under Section 10(10) of the Income Tax Act.
Gratuity Entitlement Summary
Statutory Gratuity Rules
15/26 Working Day Formula: For companies covered under the Payment of Gratuity Act 1972, a month is calculated as 26 working days (excluding Sundays). Gratuity equals 15 days of wages for every completed year of service.
6-Month Tenure Rounding: If service exceeds 6 months in the final year (e.g. 7 years and 7 months), it is rounded up to 8 years. If 6 months or less, it rounds down.
₹20,00,000 Tax-Free Cap: Gratuity up to ₹20 Lakhs received by private-sector employees is completely tax-exempt under Section 10(10). Any excess is taxed at normal income slab rates.
How this is Calculated: Gratuity Formula (Payment of Gratuity Act 1972)
Mathematical Formula
Variable Definitions
Worked Example Walkthrough
Scenario: Monthly Basic Salary ₹80,000 with 7 years and 7 months of continuous service.
Calculation: Effective Tenure: 8 years. Gratuity = (15 × ₹80,000 × 8) / 26 = ₹3,69,231.
Result: Total Gratuity: ₹3,69,231 (100% Tax-Free)
Assumptions & Methodology
- Continuous service with the same employer for at least 5 years.
- Establishment employs 10 or more people (covered under the Act).
About this Calculation Model
The Gratuity Calculator computes the statutory lump sum gratuity payable by an employer upon retirement, resignation, or job switch after continuous service. Based on the Payment of Gratuity Act, 1972, it calculates payouts using the standard 15/26 formula, applies the 6-month tenure rounding convention, and verifies the ₹20 Lakh statutory tax-free exemption cap.
How to Choose Your Calculator Inputs
1Last Drawn Monthly Basic Salary
Your last drawn monthly basic salary plus Dearness Allowance (DA). Excludes HRA, bonuses, and special allowances.
2Completed Years of Service
The total number of full continuous years served with the organization.
3Additional Months of Service
Any extra months served beyond full completed years (0 to 11 months).
Interpreting Your Projections
The calculator displays your gross gratuity entitlement, the tax-free exemption under Section 10(10), and any taxable excess. For private sector employees covered under the Act, gratuity up to ₹20,00,000 is 100% tax-free in a lifetime.
Important Statutory & Practical Considerations
- Minimum Service Prerequisite: In case of resignation or retirement, minimum 5 continuous years of service is mandatory. However, in the unfortunate event of death or permanent disability of an employee, the 5-year condition is waived.
- ₹20,00,000 Lifetime Tax Exemption Cap: The statutory maximum tax-free gratuity is capped at ₹20 Lakhs across all employers in an individual lifetime.
- CTC Component Distinctions: Variable pay, travel reimbursements, and performance incentives are not included in the basic salary definition under the Act.
- Covered vs Non-Covered Establishments: Establishments with 10 or more employees are covered under the Act (15/26 formula). Non-covered establishments utilize a 15/30 formula based on 10-month average salary.
Frequently Asked Questions
What is the statutory gratuity formula in India?
For establishments covered under the Act: Gratuity = (15 × Last Drawn Basic Salary + DA × Years of Service) / 26. 26 represents working days in a month (excluding Sundays).
Is gratuity payable if I resign after 4 years and 8 months?
Under established judicial precedents and Section 2A of the Act, completing 4 years and 240 days of continuous service in a 6-day workweek organization fulfills the continuous service condition, qualifying the employee for gratuity.
How much gratuity is exempt from income tax?
Under Section 10(10) of the Income Tax Act, gratuity received by private sector employees covered under the Act is exempt up to a lifetime statutory ceiling of ₹20,00,000. For government employees, gratuity is entirely tax-exempt.
What happens if my employer delays paying my gratuity?
Under Section 7(3A) of the Payment of Gratuity Act, the employer must disburse gratuity within 30 days of it becoming payable. If delayed, the employer is legally obligated to pay simple interest for the delayed period.
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