Gratuity Calculator

What is gratuity and who is eligible?

Gratuity is a lump-sum payment made by an employer to an employee as a token of appreciation for long service. Under the Payment of Gratuity Act, 1972, employees who have completed at least 5 continuous years of service at an organisation with 10 or more employees are eligible.

What is the gratuity formula for private employees?

For private sector employees under the Gratuity Act: Gratuity = (Last drawn Basic + DA) × 15/26 × Number of years of service. The 15/26 factor represents 15 days out of 26 working days in a month. Example: Basic+DA = ₹50,000, 10 years: Gratuity = ₹50,000 × 15/26 × 10 = ₹2,88,462.

What is the gratuity formula for government employees?

Government employees use a different formula: Gratuity = Last drawn salary × (1/4) × completed 6-month periods. For a 20-year service with ₹80,000 basic: 6-month periods = 40. Gratuity = ₹80,000 × 0.25 × 40 = ₹8,00,000.

What is the tax-free gratuity limit in India?

The tax-free gratuity limit is ₹20,00,000 (₹20 lakh) for private sector employees as per the amendment effective from 2019. For government employees and public sector employees, gratuity is fully exempt from tax without any limit. Any amount above ₹20 lakh is added to income and taxed at slab rates.

Is there a maximum gratuity limit?

There is no statutory maximum for gratuity payment — employers can pay more than the calculated amount. The ₹20 lakh tax-free limit applies only for income tax exemption, not as a cap on the actual gratuity payable. Many companies pay gratuity above this limit, with the excess being taxable.