Gratuity is a lump-sum payment made by an employer to an employee who has rendered continuous service for 5 or more years. It is calculated using the formula: (15 × Last Drawn Salary × Years of Service) / 26.

Gratuity received by government employees is fully exempt. For private sector employees, gratuity is exempt up to ₹20,00,000 under Section 10(10) of the Income Tax Act.

When is gratuity paid?

Gratuity is paid upon resignation (after 5 years), retirement, death, or disablement. Employers must pay within 30 days of it becoming due.

Gratuity Calculator - Calculate Gratuity Amount

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Monthly Basic + DA (₹)

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Gratuity Calculation

Formula(15 × Salary × Years) / 26

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Tax Exempt (up to ₹20L)-

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About Gratuity

Gratuity is a benefit under the Payment of Gratuity Act, 1972. Employees who complete 5+ years of continuous service are eligible. The formula is: (15 × Last Drawn Monthly Salary × Years of Service) / 26.

Frequently Asked Questions

What is the gratuity formula?

Gratuity = (15 × Last Drawn Monthly Salary × Years of Service) / 26. Salary includes basic + DA. 26 represents working days in a month.

Is there a minimum service period?

Yes, employees must complete 5 years of continuous service to be eligible for gratuity under the Payment of Gratuity Act.

What is the maximum gratuity amount?

The maximum exempt gratuity is ₹20,00,000 (₹20 lakh). Any amount above this is taxable. Government employees get full exemption.

✅ Do's and ❌ Don'ts

✅ Do's

✅ Do claim gratuity within 30 days of it becoming due.
✅ Do include DA in your salary calculation for gratuity.
✅ Do keep employment records for service period verification.
✅ Do invest gratuity in tax-saving instruments to save tax.

❌ Don'ts

❌ Don't resign before completing 5 years if you want gratuity.
❌ Don't forget to include DA in your salary for calculation.
❌ Don't assume gratuity is part of CTC — it's a separate benefit.
❌ Don't ignore the ₹20L exemption limit for tax planning.