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Gratuity calculator

What the gratuity formula gives for your salary and service — and how much of it is tax-free.

Not covered by the Act: use the average of the last ten months.
Covered by the Act: more than six months counts as one more year. Otherwise part-years are ignored.
The Act covers establishments that have had ten or more employees.
Leave blank to assume your employer pays the formula amount.
The ₹20 lakh limit is for your whole career.
Gratuity by the formula—
Formula amount—
Service counted—
Gratuity received—
Exempt from tax—
Taxable portion—

Educational tool with simplified assumptions. Returns are not guaranteed; actual results will differ. This is not investment, tax or legal advice.

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How it works

The maths, in plain English.

Covered by the Act. Fifteen days' wages for every year of service, with a month taken as 26 working days: 15 ÷ 26 × last drawn basic + DA × years. A final part-year of more than six months counts as a full year. It is payable after five years of continuous service (the five-year condition does not apply on death or disablement). The Payment of Gratuity Act, 1972 has been carried into the Code on Social Security, 2020, in force from 21 November 2025.

Not covered. What you receive depends on your employer's policy. For tax, the law uses half a month's average salary of the last ten months for each completed year — 15 ÷ 30 — and ignores part-years.

Tax (section 19 of the Income-tax Act, 2025; section 10(10) of the old Act). Government employees: fully exempt. Everyone else: the exempt amount is the lowest of the gratuity received, the formula amount and ₹20 lakh. The ₹20 lakh is a lifetime limit across employers. Anything above it is taxed as salary in the year of receipt, in either regime.

[VERIFY] Three points for the partners to confirm. (1) The ₹20 lakh ceiling for non-government employees is reported unchanged as of September 2026, while Central Government employees have had a ₹25 lakh ceiling since 1 January 2024 — check for a fresh notification. (2) The labour codes count allowances above 50% of pay as wages, which can raise the salary base for gratuity; enter the wage figure your employer uses. (3) Fixed-term employees are reported to qualify pro-rata after one year under the Code.

Assumptions. Monthly-rated employee (not piece-rated or seasonal); continuous service; no forfeiture. The calculator does not decide whether your establishment is covered.

Sources (checked 19 Sep 2026). Income-tax Act, 2025, section 19 (Table, Sl. Nos. 3–6) — text on Indian Kanoon · Payment of Gratuity Act, 1972, section 4(2) and 4(3); ceiling of ₹20 lakh notified 29 March 2018 · Fisher Phillips, India's labour codes and gratuity, Nov 2025 · ClearTax, income-tax exemption on gratuity

Questions

FAQ

How is gratuity calculated?
For employees covered by the gratuity law: last drawn basic salary plus DA × 15 ÷ 26 × years of service, where a final part-year of more than six months counts as a year. With ₹80,000 of basic plus DA and 20 years, that is 80,000 × 15 ÷ 26 × 20 = ₹9,23,077.
Is gratuity taxable?
Government employees pay no tax on it. For others it is exempt up to the lowest of the amount received, the formula amount and ₹20 lakh over a lifetime; the rest is taxed as salary.
What is the maximum tax-free gratuity in 2026?
₹20 lakh for non-government employees, counted across all employers in your career. Central Government employees have a higher payment ceiling of ₹25 lakh and their gratuity is fully exempt.
Do I get gratuity before completing five years?
Normally no. The exceptions are death or disablement, where the five-year condition does not apply, and fixed-term employees, who are reported to qualify pro-rata after one year under the Code on Social Security.
Why is the divisor 26 and not 30?
The law treats a month as 26 working days, excluding Sundays, so fifteen days' wages are 15/26 of monthly pay. For employees outside the Act, the tax formula uses half a month's pay, which is 15/30.
Does the new labour code change my gratuity?
It can. The Code on Social Security defines wages so that allowances above half of total pay are added back, which may raise the base on which gratuity is calculated. How your employer applies it should be confirmed with your HR team.
Is gratuity part of CTC?
Often yes — many employers show 4.81% of basic as a gratuity component of CTC. It is not paid monthly. See its effect in the take-home salary calculator.

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