Calculate your exact gratuity payout using the Payment of Gratuity Act 1972. Enter your last drawn salary and years of service for instant eligibility check, tax-free amount, and taxable portion.
Last updated: 2026 · Tax-free gratuity limit: ₹20 lakh (revised 2019) · Formula: (Salary × 15 × Years) ÷ 26
⚠️ For illustration only. Consult HR or a labour law expert for your final entitlement.
Track your gratuity accumulation milestones. This breakdown shows projected statutory payments based on your current monthly salary of --. Future payout reflects the 15/26 formula for covered employees (or 15/30 for others).
| Service tenure | Projected Gratuity | Growth % |
|---|
Computing your gratuity involves identifying three key variables: your last salary, tenure, and whether the Gratuity Act applies. Follow these steps for an accurate estimate:
Add your Basic Salary and Dearness Allowance (DA) from your last payslip. Exclude HRA, bonuses, and special allowances as they are not part of the statutory definition of 'salary' for gratuity.
Count your total completed years. If your final year has 6 months or more, round it up to the next full year (e.g., 7 years 7 months = 8 years). If less than 6 months, round down.
Multiply your salary (Step 1) by 15, then multiply by your effective years (Step 2), and finally divide by 26.
If your total is below ₹20 Lakh, it is completely tax-free under Section 10(10). Any amount exceeding this limit is taxable income.
Gratuity is a statutory retirement benefit paid by employers to employees who complete 5+ years of continuous service, governed by the Payment of Gratuity Act, 1972.
Gratuity = (Basic+DA × 15 × Effective Years) ÷ 26
Example: ₹50,000/month × 15 × 10 years ÷ 26 = ₹2,88,462
For uncovered employees the divisor is 30 (not 26), giving: ₹50,000 × 0.5 × 10 = ₹2,50,000
Gratuity is exempt from income tax under Section 10(10) of the Income Tax Act:
At ₹50,000/month for 40 years: gratuity = ₹11.5L — well within the tax-free limit.
Only Basic Salary + Dearness Allowance (DA) is used for the gratuity formula.
A higher Basic Salary ratio in your CTC leads to a higher gratuity. Many employees negotiate a lower Basic to maximise in-hand pay — but this reduces gratuity.
Employers can forfeit gratuity only in limited cases:
If an employer refuses to pay, file with the Controlling Authority (Labour Commissioner). Delayed payment beyond 30 days attracts 10% simple interest per annum.
These three are separate, simultaneous retirement benefits — all payable on exit:
Use the EPF Calculator and NPS Calculator alongside this for your full retirement picture.
Understand how gratuity grows with salary and years of service using these examples.
Salary: ₹50,000/month
Service: 10 years
👉 Gratuity = ₹2.88 lakh
✔ Fully tax-free
Salary: ₹1,50,000/month
Service: 20 years
👉 Gratuity = ₹17.3 lakh
✔ Fully tax-free
Salary: ₹3,00,000/month
Service: 25 years
👉 Gratuity = ₹43.2 lakh
⚠ ₹23.2 lakh taxable
The Payment of Gratuity Act, 1972 applies to organisations with 10 or more employees in factories, mines, oilfields, plantations, ports, railways, shops, or other establishments. Once an establishment is covered, it remains so even if its strength falls below 10. Smaller establishments may pay gratuity voluntarily by agreement. Government employees are covered under separate service rules with full tax exemption.
Yes, in most cases. The Supreme Court and most High Courts have held that if an employee has worked 4 years and 240+ days (approximately 6+ months in the 5th year), they become eligible. The calculator rounds up months ≥6 in the final year automatically. However, some employers and courts interpret this strictly as exactly 5 years — consult a labour lawyer if disputed.
File a written application with your employer first (within 30 days of eligibility). If refused, file a complaint with the Controlling Authority (usually the Assistant Labour Commissioner) under Section 7 of the Gratuity Act. Delayed payment beyond 30 days attracts simple interest at 10% per annum. Criminal prosecution is possible under Section 9 for wilful default.
No. Gratuity is payable on: resignation (after 5 years), superannuation, retirement, death (to nominee/legal heir), permanent disability, or retrenchment. On death or disability, the 5-year requirement is completely waived. The gratuity must be paid within 30 days of becoming due.
Yes. Gratuity and EPF are completely separate legal entitlements. Both are payable on exit simultaneously. Gratuity comes from the employer's funds (or a gratuity trust/insurance policy), while EPF is a separate accumulated corpus from monthly contributions. Many companies also pay leave encashment as a third benefit.
There is no upper cap on the gratuity amount under the Act itself — the formula can yield any amount based on salary and years. However, the tax exemption is capped at ₹20 lakh. Any gratuity above ₹20L must still be paid in full by the employer but the excess is taxable income. Employers can also voluntarily pay more than the Act mandates.
Yes, if they meet the continuous service requirement. The definition of "employee" under the Act is broad and covers full-time, part-time, contractual, and piece-rate workers. Continuous service includes authorised leave, lay-off, and lockout periods. Short breaks in service may not break continuity if within the Act's provisions.
Yes, and it is highly recommended. Under Section 6 of the Act, every employee who completes one year of service must nominate one or more family members. If you have a family, the nomination must be in favour of family members only; nominating a third party when you have a family is legally invalid.
Generally, yes, if you have completed 5 years. However, gratuity can be forfeited if termination is for wilful misconduct, riotous behaviour, or an act of violence. If termination is for causing financial loss to the employer, the forfeiture is limited only to the extent of the loss.