₹
Enter your last drawn Basic Salary + Dearness Allowance
Minimum 5 years required for eligibility
Note: Gratuity is payable only after completing 5 years of continuous service. The 5-year rule is waived in case of death or disablement.
Total Gratuity Payable
₹0
Enter salary and years to calculate
Gratuity is tax-free up to ₹20 lakh for private sector employees. Government employees receive full exemption.
How Gratuity is Calculated
Under the Payment of Gratuity Act, 1972, gratuity is calculated using a simple formula:
Gratuity = (Monthly Salary × 15 × Years of Service) ÷ 26
Monthly Salary = Basic + DA | 15 = Days of wages per year | 26 = Working days in a month
Example: If your Basic + DA is ₹50,000 and you've worked for 20 years:
Gratuity = (50,000 × 15 × 20) ÷ 26 = ₹5,76,923
Eligibility Criteria
- Minimum 5 years of continuous service with the same employer
- Applicable on retirement, resignation, death, or disablement
- The 5-year rule is waived in case of death or disablement
- Applies to establishments with 10 or more employees
- Covers factories, mines, plantations, ports, railways, shops, and other establishments
Tax Treatment
- Government employees: Entire gratuity is fully exempt from tax
- Private sector employees: Exempt up to ₹20,00,000 under Section 10(10)
- Amount exceeding ₹20 lakh is taxable at your slab rate
- The ₹20 lakh limit is aggregate across all employers in your career
Frequently Asked Questions
How is gratuity calculated in India?
Gratuity = (Monthly Salary × 15 × Years of Service) ÷ 26. Monthly Salary means Basic + DA. The formula assumes 26 working days in a month and rewards 15 days' wages for each year of service.
What is the minimum service required for gratuity?
5 years of continuous service is required. However, this condition is waived if the employee dies or becomes disabled due to accident or disease.
Is gratuity taxable?
For private sector employees, gratuity up to ₹20 lakh is tax-free. Government employees receive full exemption. Any amount above ₹20 lakh is taxed at your applicable income tax slab.
What salary components are used for gratuity?
Only Basic Salary and Dearness Allowance (DA) are considered. HRA, special allowances, bonuses, and other components are not included.
How are partial years counted?
If you've worked 6 months or more beyond completed years, it rounds up to the next year. Example: 8 years 7 months = 9 years. Less than 6 months is ignored (8 years 5 months = 8 years).