Updated for 2026 · Payment of Gratuity Act 1972 + Code on Social Security · ₹20L tax-free
Gratuity Calculator
Find your exact gratuity payout under the Payment of Gratuity Act — with the correct 26-day formula, the 6-month rounding rule, how much is tax-free, and the new Labour Code rule that gives fixed-term staff gratuity after just 1 year.
Just basic pay + dearness allowance — not your full CTC.
Months in your final, incomplete year (0–11).
Divisor 26, part-year ≥6 months rounds up.
Needs 5 years of continuous service.
Gratuity payable
₹3,17,308
₹50,000 × 15 × 11 ÷ 26 — your 10y 7m counts as 11 years (≥6 months rounds up)
Tax-free
₹3,17,308
100% — exempt under Section 10(10)
Taxable
₹0
within the ₹20L cap
Good to know: unlike HRA, the gratuity exemption under Section 10(10) applies in both the old and new tax regimes. The ₹20 lakh tax-free limit is a lifetime ceiling across all your employers.
Government employee? Your gratuity is computed under separate CCS Pension Rules (¼ of emoluments per six-monthly period, capped at 16.5× pay or ₹25 lakh) and is fully tax-exempt — this calculator is built for private-sector employees, so your payout figure will differ.
Based on the Payment of Gratuity Act, 1972 and Section 10(10) of the Income-tax Act, updated for 2026. Covered employers (10+ employees) use 15 days' wages per year on a 26-day month with the final part-year rounded up at 6 months; not-covered employers use a 30-day divisor and only completed years. Eligibility is 5 years of continuous service (1 year for fixed-term employees under the Code on Social Security, 2020, in force from 21 Nov 2025; waived for death or disablement). For not-covered employees the tax exemption technically uses ½ month of your last-10-months average salary — this tool uses your last drawn salary as a close proxy. General information, not tax advice — confirm at incometax.gov.in and with your employer.
How gratuity is calculated in India
Gratuity is a lump sum your employer pays you for long service, governed by the Payment of Gratuity Act, 1972. If your employer is covered by the Act — which applies to any establishment with 10 or more employees — the formula is last drawn salary × 15 × years of service ÷ 26, where "salary" is your basic pay plus dearness allowance (not your full CTC). The 15 stands for 15 days' wages per year, and the 26 treats a month as 26 working days. The calculator above applies this exactly, including the rounding rule most people get wrong — and also shows how much of the payout is tax-free, which most calculators skip.
The 6-month rounding rule (and the 26 vs 30 divisor)
Two details quietly change your number. First, rounding: under a covered employer, if your final year of service is 6 months or more, it rounds up to a full year — so 10 years 7 months counts as 11 years, but 10 years 5 months counts as 10. Second, the divisor: covered employers use 26, but employers not covered by the Act use 30 (and count only completed years, no rounding). Because 15/26 is larger than 15/30, employees of covered companies receive a noticeably higher gratuity for the same salary and tenure. The toggle in the calculator lets you see both.
Who is eligible — and the 5-year question
The headline rule is 5 years of continuous service with the same employer, on retirement, resignation, superannuation or termination. That requirement is waived entirely if service ends due to death or disablement, in which case gratuity is paid (to nominees, for death) regardless of tenure. The famous grey area is the "4 years 240 days" rule: completing 240 days in your fifth year can be treated as a full fifth year under the Madras High Court's reading of Section 2A — so roughly 4 years 8 months may qualify. It's binding in Tamil Nadu and persuasive (not guaranteed) elsewhere, so confirm with your employer.
New for 2026: fixed-term staff get gratuity after 1 year
This is the change most calculators haven't caught. With the Code on Social Security, 2020 in force from 21 November 2025, fixed-term employees are now entitled to gratuity on a pro-rata basis after just one yearof continuous service — not five. For India's large and growing fixed-term and contract workforce, that's a major gain: a worker who finishes a one- or two-year fixed-term contract now walks away with a proportionate gratuity that would previously have been forfeited. Permanent, regular employees still follow the 5-year rule. Switch the employment-type toggle to see how it changes your eligibility.
How much of your gratuity is tax-free
Under Section 10(10) of the Income-tax Act, a private employee's gratuity is exempt up to the least of three figures: ₹20 lakh(a lifetime ceiling across all employers), the actual gratuity received, and the formula amount. In practice that means almost everyone's gratuity is fully tax-free — only very large payouts breach the ₹20 lakh cap, with the excess taxed at slab rates. Government employees get their gratuity fully exempt (with a ₹25 lakh payment ceiling since January 2024). And unlike the HRA exemption, this one works under boththe old and new tax regimes — a small but valuable detail when you're deciding which regime to file under, which our Old vs New Regime calculator can help with.
Worked example: ₹50,000 salary, 10 years 7 months
The setup. Anil works at a company covered by the Act (over 10 employees). His last drawn basic + DA is ₹50,000 a month and he has served 10 years and 7 months.
The rounding. Because his final part-year is 7 months — more than 6 — it rounds up, so his service counts as 11 years, not 10. This single rule adds a full year's worth of gratuity.
The math. Gratuity = ₹50,000 × 15 × 11 ÷ 26 = ₹3,17,308. That's comfortably under the ₹20 lakh ceiling, so the entire amount is tax-free — and exempt whether Anil files under the old or the new regime. Had his employer not been covered by the Act, the divisor would be 30 and his tenure just 10 completed years, giving ₹50,000 × 15 × 10 ÷ 30 = ₹2,50,000 — about ₹67,000 less. Change any input in the calculator and the payout, the rounded years and the tax-free split all update instantly.
Frequently asked questions
How much gratuity will I get after 5 years?
For an employee covered under the Payment of Gratuity Act, gratuity after exactly 5 years equals your last drawn monthly salary (basic + DA) × 15 × 5 ÷ 26. On a ₹50,000 basic-plus-DA salary that's ₹50,000 × 15 × 5 ÷ 26 = ₹1,44,231. The 5 years must be continuous service with the same employer, and the whole amount is tax-free as long as it (and your lifetime total) stays within the ₹20 lakh exemption. Enter your own salary and tenure in the calculator above to see your exact figure.
Why is gratuity calculated as 15/26?
The 15/26 represents 15 days of wages for every completed year of service, where a working month is treated as 26 days (the Act assumes four Sundays are unpaid, leaving 26 working days). So your daily wage is your monthly salary ÷ 26, and you earn 15 of those days per year of service. This 26-day divisor applies to employers covered by the Payment of Gratuity Act. Employers not covered use a 30-day divisor instead (15/30 = half a month per year), which produces a slightly lower amount.
Is 4 years and 7 months eligible for gratuity?
Generally no — 4 years 7 months falls short of the threshold. The accepted shortcut is the '4 years 240 days' rule: if you've completed 4 full years plus at least 240 days in your fifth year (roughly 4 years 8 months in a six-day-week establishment), the Madras High Court has held you're deemed to have completed 5 years and qualify. At 4 years 7 months you're just under that line, so eligibility is doubtful. Note this 240-day interpretation is binding in Tamil Nadu and only persuasive elsewhere, so it depends on your employer and state.
What is the maximum gratuity amount and is it taxable?
For private-sector employees the maximum tax-free gratuity is ₹20 lakh — a lifetime limit across all employers — under Section 10(10) of the Income-tax Act. Anything above ₹20 lakh is added to your income and taxed at your slab. Government employees have their gratuity fully exempt, with a separate ₹25 lakh payment ceiling (raised from ₹20 lakh effective 1 January 2024). A useful point many people miss: the gratuity exemption applies under both the old and the new tax regime, unlike HRA which only works in the old regime.
What is the gratuity for a ₹20,000 salary?
Taking ₹20,000 as your last drawn basic + DA and assuming an employer covered by the Act, gratuity for 5 years is ₹20,000 × 15 × 5 ÷ 26 = ₹57,692; for 10 years it's ₹1,15,385; and for 20 years it's ₹2,30,769. The amount scales linearly with both your salary and your years of service, and is fully tax-free at these levels (well under the ₹20 lakh cap). Change the salary and tenure in the calculator to model your own situation.
Do fixed-term and contract employees get gratuity now?
Yes — this is the big recent change. Under the Code on Social Security, 2020 (in force from 21 November 2025), fixed-term employees are entitled to gratuity on a pro-rata basis after just one year of continuous service, instead of the usual five. So a fixed-term worker who completes one or two years now gets a proportionate gratuity they previously would have lost. This applies to fixed-term contracts specifically; regular permanent employees still follow the standard 5-year rule (except in cases of death or disablement).
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