Gratuity Calculator India 2026
Compute gratuity payable under the Payment of Gratuity Act, 1972. Formula: (Last drawn basic + DA) × 15/26 × Years of service. Tax-free up to ₹20 lakh under Section 10(10). Updated for 2026.
Gratuity Calculator
Quick facts to know
- Formula uses LAST drawn basic + DA — not gross salary, not CTC
- Years rounded up if you completed ≥ 6 months in your final year (e.g. 5y 8m → 6 yrs)
- Tax-free up to ₹20 lakh lifetime (across all employers) under Section 10(10)
- Death or permanent disability waives the 5-year minimum service requirement
- Payable within 30 days of leaving — interest at govt rates if delayed
- Government / PSU employees: gratuity is fully tax-free (no ₹20L cap)
Watch-outs
- •Some employers wrongly compute gratuity on basic only (not basic + DA) — challenge under Section 4(2)
- •4 years 7 months = 4 years per the Act — no gratuity (need 5+ continuous years)
- •Continuous service is uninterrupted — leave + maternity counts; sabbatical or unauthorised absence may not
- •Termination for fraud/violence forfeits gratuity (Section 4(6))
- •Contract terms can give MORE than statutory minimum, never less — read your offer letter
Gratuity FAQ
What is the gratuity formula in India?
For employers covered under the Payment of Gratuity Act (10+ employees): Gratuity = (Last drawn basic + DA) × 15/26 × Years of continuous service. The 15/26 represents 15 days' wages out of a 26-day working month. For employers NOT covered, the formula is 15/30 (half a month per year).
Is gratuity tax-free?
Tax-free up to ₹20 lakh lifetime cap across all employers under Section 10(10). Above that cap, fully taxable as salary income. Government employees have no cap — fully tax-free regardless of amount. Death gratuity to nominee is fully tax-free regardless of amount.
When is gratuity payable?
On retirement, resignation, termination, death, or permanent disability — provided you've completed 5+ years of continuous service. Death/disability waives the 5-year rule. Payable within 30 days of leaving. Interest at government-notified rates accrues on delay.
What counts as continuous service?
Uninterrupted service including approved leave, maternity (up to 26 weeks), and lawful strikes. Unauthorised absence over 6 months can break continuity. Layoffs preserve continuity. Transfer to a sister concern under the same employer preserves it. Re-employment after resignation does NOT — it starts a new clock.
Can my employer refuse to pay gratuity?
Only in cases of (a) termination for wilful misconduct, fraud, violence, or moral turpitude proven via disciplinary proceedings, OR (b) employer not covered by the Act AND no contractual obligation. Otherwise refusal is illegal — file Form N at the Labour Commissioner's office, or approach the Controlling Authority under the Gratuity Act.
Is the ₹20 lakh tax-free cap per employer or lifetime?
Lifetime, cumulative across all employers. If you received ₹8L gratuity tax-free from one employer, only ₹12L tax-free is left for future gratuity. Excess beyond ₹20L lifetime is taxed at your marginal slab rate as salary income.
Does the formula change for non-covered employers?
Yes. Employers with fewer than 10 employees aren't covered by the Act. They may follow Section 4 voluntarily, or use a different formula (typically 15/30 — half month per year — half of statutory). Their gratuity is still tax-exempt up to a separate lower cap (₹10 lakh) under Section 10(10)(iii).