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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.

TaxClue Editorial Desk Updated 18 August 2026 5 min read 14 FAQs 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.

Rate 15 days/yr
Divisor 26 days
Exempt cap ₹20L
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 →
Government sourcesPayment of Gratuity Act, 1972 · Income Tax: incometax.gov.in · Section 10(10), Income-tax Act — gratuity exemption
People also ask

Frequently Asked Questions

Formula
What is the formula for gratuity calculation?
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.
How many days are used in the gratuity formula — 26 or 30?
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.
Is HRA or gross salary used in the gratuity formula?
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.
How are years of service rounded?
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.
Eligibility
Who is eligible for gratuity?
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.
Can I get gratuity before completing 5 years?
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.
Is gratuity paid on resignation?
Yes, provided you have completed 5 years of continuous service with the employer. Gratuity is payable on resignation, retirement, superannuation, death or disablement.
Taxation
Is gratuity taxable in India?
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.
What is the maximum gratuity exemption limit?
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.
Is the ₹20 lakh exemption per job or a lifetime limit?
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.
How do I report gratuity in my ITR?
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.
Payment
When must the employer pay gratuity?
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.
What if my employer is not covered by the Gratuity Act?
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.
Does this calculator apply to employees not covered by the Act?
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.
If you would rather not do it yourself

Related TaxClue services

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TaxClue for salaried taxpayers

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