What is the formula to calculate gratuity in India?

For employees covered under the Payment of Gratuity Act, 1972, the formula is: Gratuity = (15 × Last Drawn Monthly Basic + DA × Completed Years of Service) ÷ 26.

What is the minimum service period required for gratuity eligibility?

An employee must complete at least 5 continuous years of service with the same employer to become eligible for gratuity. However, the 5-year requirement is waived in the event of death or permanent disablement.

Is gratuity taxable in India?

Gratuity received by government employees is completely tax-free. For private sector employees covered under the Act, gratuity is tax-exempt up to a lifetime statutory ceiling of ₹20,00,000 under Section 10(10). Any amount exceeding ₹20 Lakh is taxable as income from salary.

Statutory Retirement Benefit

Gratuity Calculator

Payment of Gratuity Act, 1972. Calculate your lump-sum payout upon leaving an organization or retirement.

Last Drawn Monthly Basic Salary (+ DA)

₹

Completed Years of Service

If service period in the final year exceeds 6 months (e.g. 5 years 7 months), it rounds up to 6 years.

Establishment Coverage

Covered under Act (15/26) Not Covered (15/30)

Most registered companies with 10+ employees are covered under the Act.

Estimated Gratuity Payable Eligible (≥ 5 Years)

₹2,07,692

Tax-Free Lump Sum (under ₹20 Lakh limit)

Tax Exemption 100% Tax Free

Taxable Portion ₹0

Monthly CTC Accrual ₹2,885 / mo

Statutory Max Cap ₹20,00,000

Continuous Service Requirement

You have completed 6 years of continuous service, which satisfies the mandatory 5-year eligibility criteria under Section 4(1) of the Payment of Gratuity Act, 1972.

Note: Gratuity is paid upon termination of employment (resignation, retirement, superannuation, or VRS).

Calculation Formula Breakdown

Gratuity = (15 × Monthly Basic × Years of Service) ÷ 26

Monthly Basic Salary	₹60,000
15 Days Salary (Monthly Basic × 15 ÷ 26)	₹34,615
Completed Years of Service	6 Years
Total Gratuity Payable	₹2,07,692

Everything You Need to Know About Gratuity in India

Gratuity is a statutory monetary benefit provided by employers in India under the Payment of Gratuity Act, 1972 as a token of appreciation for long and meritorious service.

The 26-Day Working Month Rule

Under Indian labour jurisprudence, for the purpose of calculating 15 days of salary, a month is legally deemed to comprise 26 working days (excluding 4 weekly holidays/Sundays). Therefore, your daily wage rate is computed as Monthly Basic ÷ 26, and 15 days of wages equals (Monthly Basic × 15) ÷ 26.

Tax Exemption on Gratuity

Under Section 10(10) of the Income-tax Act, gratuity received by private sector employees is exempt from income tax up to a maximum lifetime ceiling of ₹20,00,000 (Twenty Lakh Rupees). Any amount in excess of ₹20 Lakh is added to taxable salary income for that financial year and taxed according to your applicable slab rate.