Gratuity Calculator India 2026 - Private & Govt Sector, Tax Exemption | Free Tool
Gratuity Calculator India
Calculate your exact gratuity under the Payment of Gratuity Act, 1972 with tax exemption
Understanding Gratuity in India (Payment of Gratuity Act, 1972)
Gratuity is a lump sum payment made by an employer to an employee as a token of appreciation for their long-term service. It is a statutory right under the Payment of Gratuity Act, 1972, applicable to establishments with 10 or more employees.
The Exact Gratuity Formula
For private sector employees, the legal formula is:
Gratuity = (15 / 26) × Last Drawn Salary (Basic + DA) × Years of Service
- 15/26: Represents 15 days of wages for every completed year of service. 26 is the number of working days in a month.
- Last Drawn Salary: Only Basic Salary + Dearness Allowance (DA). HRA, Bonus, and Overtime are NOT included.
- Years of Service: Only completed years are counted.
The "Rounding Rule" (Crucial for Accuracy)
Under the Gratuity Act, if an employee has worked for more than 6 months in the last year of service, it is rounded up to the next full year. If it is less than 6 months, it is ignored.
- Example 1: 5 years and 7 months = 6 years (7 months > 6, so rounded up)
- Example 2: 5 years and 4 months = 5 years (4 months < 6, so ignored)
Gratuity Tax Exemption Rules (Section 10(10))
Gratuity received is partially or fully tax-exempt. The exempt amount is the LEAST of the following three:
- 1. Actual Gratuity Received
- 2. ₹20,00,000 (Maximum statutory limit)
- 3. Eligible Amount calculated as: (15/26) × Salary × Years of Service
Any amount above this exempt limit is added to your taxable income and taxed as per your income tax slab.
Is 5 years of service mandatory for gratuity?
Yes, generally an employee must complete 5 continuous years of service. However, this rule is waived in case of death or disablement due to accident or disease. In such cases, gratuity is paid even if service is less than 5 years.
Does HRA count in gratuity calculation?
No. Only Basic Salary and Dearness Allowance (DA) are considered. House Rent Allowance (HRA), Special Allowances, Bonuses, and Overtime are strictly excluded from the calculation.
What is the maximum gratuity amount in India?
The maximum tax-exempt gratuity amount is capped at ₹20 Lakhs for private sector employees. Government employees may have different limits based on specific government notifications (currently ₹20 Lakhs for Central Govt employees as well).
Can an employer refuse to pay gratuity?
No. If an employee is eligible (5+ years), the employer is legally bound to pay gratuity within 30 days of it becoming payable. Failure to pay attracts simple interest and penalties under the Gratuity Act.
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