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Guide · Calculators & Tools

Gratuity Calculator — Instant & Free

Enter your last drawn Basic + DA and years of service to get your exact gratuity, the tax-exempt portion (up to ₹20 lakh) and any taxable amount — using the Payment of Gratuity Act, 1972 formula.

Written by
TaxClue Editorial Desk
Updated
18 August 2026
Reading time
5 min
Questions
14 answered
  • Payment of Gratuity Act, 1972
  • ₹20L exempt cap
  • CA-reviewed
Gratuity Calculator

This calculator computes the gratuity payable when an employee leaves after 5+ years of continuous service. The formula is (Last drawn Basic+DA × 15 × Years of service) ÷ 26. Gratuity up to ₹20 lakh is tax-exempt under the Income-tax Act. Enter your last salary and years below for an instant, itemised result.

Basic salary + Dearness Allowance only — not gross salary
6+ months in last year counts as 1 full year
How to read the result

The tool rounds service years (6+ months in the final year counts as a full year), then shows three figures: total gratuity, the tax-exempt portion (capped at ₹20 lakh), and any taxable balance added to your salary income.

How it works

Gratuity Formula Explained

For employees covered under the Payment of Gratuity Act, 1972, gratuity is calculated as:

Gratuity = (Last Drawn Basic + DA) × 15 × Years of Service ÷ 26

  • 15 — 15 days' salary for each completed year of service
  • 26 — working days in a month (excluding 4 Sundays)
  • Years of service — rounded up if the last year has 6+ months completed
  • Last drawn salary — Basic + DA only (not HRA, allowances or gross)
Worked example

Gratuity Example — FY 2025-26

DetailValue
Last Basic + DA (monthly)₹50,000
Years of service10 years
Gratuity = (50,000 × 15 × 10) ÷ 26₹2,88,461
Tax-exempt limit₹20,00,000
Taxable gratuity (excess above ₹20L)₹0 (within limit)

Divisor is 26 under the Payment of Gratuity Act. Some employers use a 30-day divisor for non-statutory gratuity — check your appointment letter.

Taxation

Gratuity Tax Exemption — How It Works

Gratuity for a government employee is fully exempt. For a non-government employee covered under the Act, the exemption is the least of these three:

  • Actual gratuity received
  • ₹20,00,000 — maximum statutory exemption
  • Formula amount: (15 × Last Salary × Years) ÷ 26

Only the excess over the exempt amount is added to salary income and taxed at your applicable slab rate.

Multiple employers? The ₹20L cap is a lifetime limit

The ₹20 lakh exemption is a cumulative lifetime cap across all employers. If you claimed exemption on gratuity from an earlier job, only the balance of the ₹20 lakh is available for the next one.

Who qualifies

Gratuity Eligibility Rules

  • 5 years of continuous service with the same employer is required
  • The 5-year rule is waived on death or disability
  • Applies to establishments (factory, mine, shop, company) with 10 or more employees
  • Payable on resignation, retirement, superannuation, death or disablement

Received gratuity this year? Get the exempt vs taxable split reported correctly in your ITR.

Talk to a CA →
Sources
  1. Payment of Gratuity Act, 1972
  2. Income Tax: incometax.gov.in
  3. Section 10(10), Income-tax Act — gratuity exemption

Disclaimer: This guide is general information based on the law and notifications in force when it was last updated. It is not professional advice for your case — rates, thresholds and due dates change, so check the current position or speak to our CA team before you act on it.

People also ask

Questions, answered

Short, direct answers to the 14 questions readers ask most on this topic.

Gratuity = (Last drawn salary × 15 × Years of service) ÷ 26. "Last drawn salary" means Basic + Dearness Allowance. "Years of service" is rounded to the nearest full year (6+ months = 1 year). This formula applies to employees covered under the Payment of Gratuity Act, 1972.

The Payment of Gratuity Act uses 26 working days per month (assuming 4 Sundays off per month), so the formula divides by 26, not 30. Some employers use a 30-day formula for non-statutory gratuity — always check your appointment letter or company policy.

No. Only Basic + Dearness Allowance (DA) is used. HRA, conveyance, bonus, overtime and other allowances are excluded. Use your last drawn monthly Basic + DA, not your gross or CTC.

If the final year of service has 6 or more months completed, it is rounded up to a full year; less than 6 months is dropped. For example, 8 years 7 months counts as 9 years, while 8 years 4 months counts as 8 years.

An employee who has completed at least 5 years of continuous service with the same employer is eligible. The 5-year rule is waived in cases of death or disability. Gratuity applies to establishments (factory, mine, oilfield, plantation, port, railway, shop or establishment) with 10 or more employees.

Generally no — 5 years of continuous service is the minimum. The only exceptions are death or disablement of the employee, where gratuity is payable regardless of tenure to the employee or nominee.

Yes, provided you have completed 5 years of continuous service with the employer. Gratuity is payable on resignation, retirement, superannuation, death or disablement.

Gratuity received by a government employee is fully exempt. For non-government employees covered under the Act, the tax-exempt amount is the least of: actual gratuity received, ₹20,00,000, or (Last salary × 15 × Years) ÷ 26. The excess is taxable as salary income.

The maximum tax-exempt gratuity is ₹20,00,000 (₹20 lakh). Any gratuity received above this limit is taxable as salary income in the year of receipt.

It is a cumulative lifetime cap across all employers. If you already claimed part of the ₹20 lakh exemption on gratuity from a previous employer, only the unused balance is available for exemption on the next gratuity.

Show the total gratuity under Income from Salary, then claim the exempt portion under Section 10(10). The taxable balance (if any) is taxed at your slab rate. A CA can ensure the exempt vs taxable split is computed and disclosed correctly.

Gratuity must be paid within 30 days of it becoming payable. If delayed beyond 30 days, the employer is liable to pay simple interest on the amount from the due date until payment.

If your establishment has fewer than 10 employees or is otherwise outside the Act, gratuity is paid at the employer's discretion or per your employment contract. The tax exemption formula for such cases uses half-month average salary × years, and the ₹20 lakh cap still applies.

This calculator uses the statutory (Act-covered) formula: Basic+DA × 15 × Years ÷ 26. For employees not covered by the Act, gratuity is often computed on a 30-day basis using average salary — check your company policy, though the ₹20 lakh tax-exempt cap remains the same.