Gratuity amount · Eligibility check · Tax exemption · Covered vs non-covered employees · Maximum limit ₹20 lakhs
Gratuity Calculator India — Payment of Gratuity Act 1972 Explained
Gratuity is a statutory benefit paid by employers to employees who have completed at least 5 years of continuous service. It's calculated using a government-mandated formula and is one of the most searched topics when someone resigns or retires from a job.
The Gratuity Formula
For employees covered under the Payment of Gratuity Act: Gratuity = (Last Basic + DA) × 15 × Years of Service / 26
The 15 represents 15 days of salary per year. The 26 represents working days in a month (excluding 4 Sundays). So effectively you get 15/26 of your monthly Basic+DA for every year of service.
For employees NOT covered under the Act (or government employees): Gratuity = (Last Basic + DA) × 30 × Years of Service / 26 — a more generous formula giving 30 days instead of 15.
The 5-Year Rule — And the Exception
Minimum 5 years of continuous service is required for gratuity eligibility. However, in cases of death or permanent disability, gratuity is payable regardless of years served — even on day one of employment.
The 6-Month Rounding Rule
If you've worked 10 years and 6 months or more, it rounds up to 11 years for gratuity calculation. Less than 6 months extra is ignored. This 6-month rule applies for resignation — for death/disability there's no minimum service requirement.
Is gratuity taxable in India?+
Gratuity received by private sector employees is tax-free up to ₹20 lakhs under Section 10(10) of the Income Tax Act. Any amount above ₹20 lakhs is taxable at your income slab rate. Government employees' gratuity is fully tax-free with no upper limit. The ₹20 lakh limit applies across all employers in your lifetime — not per employer.
Can I claim gratuity if I resign before 5 years?+
No. 5 years of continuous service is mandatory for gratuity eligibility in case of resignation. The only exceptions are death and permanent disability — gratuity is paid to the nominee/employee regardless of tenure. Some companies pay ex-gratia (voluntary gratuity) for less than 5 years but this is at the employer's discretion, not a legal right.
Does gratuity include HRA or bonus?+
No. Gratuity is calculated only on Basic Salary + Dearness Allowance. HRA, special allowance, overtime, bonus, commission, and any other allowances are excluded from the gratuity calculation formula. This is why your actual gratuity amount is often lower than people expect — it's based on basic, not CTC.
When must the employer pay gratuity?+
The employer must pay gratuity within 30 days of the employee's resignation/retirement/death. If payment is delayed, the employer must pay simple interest at the rate prescribed by the government. Employees can file a claim with the Controlling Authority under the Payment of Gratuity Act if the employer fails to pay.
What is the maximum gratuity amount?+
There is no legal upper limit on the gratuity amount that an employer can pay — the ₹20 lakh limit is only for tax exemption. An employer can pay more than ₹20 lakhs in gratuity; the excess is simply taxable in the employee's hands. The ₹20 lakh tax-free limit was increased from ₹10 lakhs in 2018 and hasn't changed since.