Gratuity Calculator 2026
Calculate your gratuity amount as per the Payment of Gratuity Act. Free calculator for private employees, government employees with eligibility check and tax calculation.
Gratuity = (Salary × 15 × Years) ÷ 26
Enter Your Details
Companies with 10+ employees are covered under the Act
Basic salary only (excluding HRA, other allowances)
Enter 0 if DA is not applicable
Minimum 5 years required for eligibility
Your Gratuity Details
Eligibility Status
Eligible ✓
Last Drawn Salary (Basic + DA)
₹55,000
Completed Years of Service
11 years
Gratuity Amount
₹3,48,077
Tax-Exempt Limit
₹20,00,000
Taxable Gratuity
₹0
What is Gratuity?
Gratuity is a monetary benefit given by an employer to an employee for the services rendered during employment. It is a token of appreciation paid at the time of retirement, resignation, or death. Gratuity is governed by the Payment of Gratuity Act, 1972 in India.
Key Point: Gratuity is a defined benefit plan, meaning the employer must pay it regardless of profits. It is calculated based on your last drawn salary and years of service.
Gratuity Eligibility Criteria
- Minimum 5 years of continuous service with the same employer
- Applicable to organizations with 10 or more employees
- In case of death or disability, gratuity is payable even before completing 5 years
- The 5-year rule can be relaxed if service is more than 4 years and 6 months (rounded to 5 years)
Gratuity Calculation Formula
There are two formulas depending on whether you're covered under the Payment of Gratuity Act:
Covered under Act (10+ employees):
Gratuity = (Last Salary × 15 × Years of Service) ÷ 26
Gratuity = (Last Salary × 15 × Years of Service) ÷ 26
Not Covered under Act:
Gratuity = (Last Salary × 15 × Years of Service) ÷ 30
Gratuity = (Last Salary × 15 × Years of Service) ÷ 30
Where:
- Last Salary = Basic Salary + Dearness Allowance (DA)
- 15 = Number of days of salary per year
- 26 = Working days in a month (for covered employees)
- 30 = Days in a month (for non-covered employees)
Gratuity Tax Rules 2026
| Employee Type | Tax-Exempt Limit | Taxable Amount |
|---|---|---|
| Government Employees | Fully Exempt | ₹0 |
| Private (Covered under Act) | ₹20,00,000 | Amount above ₹20 lakh |
| Private (Not Covered) | Least of: Actual, ₹20 lakh, or Calculated | Amount above exempt limit |
Tax Tip: If you receive gratuity from multiple employers in your career, the total exemption across all is still capped at ₹20 lakh. Any gratuity received above this cumulative limit is taxable.
Gratuity Example Calculation
Let's calculate gratuity for an employee with:
- Basic Salary: ₹60,000/month
- DA: ₹10,000/month
- Years of Service: 12 years 8 months (rounded to 13 years)
Gratuity = (70,000 × 15 × 13) ÷ 26 = ₹5,25,000
Since ₹5,25,000 is below ₹20 lakh limit, the entire amount is tax-free.
When is Gratuity Paid?
- Retirement - At the time of superannuation
- Resignation - After completing 5 years of service
- Death - Paid to nominee/legal heir (no 5-year requirement)
- Disability - Due to accident or illness (no 5-year requirement)
- Termination - If not for misconduct and after 5 years
Gratuity Forfeiture Rules
An employer can forfeit gratuity (fully or partially) if the employee is terminated for:
- Riotous or disorderly conduct
- Any act of violence
- Any act which constitutes an offense involving moral turpitude
- Causing damage to employer's property (to the extent of damage)
Frequently Asked Questions
Is gratuity mandatory for employers?
Yes, gratuity is mandatory for all establishments with 10 or more employees at any point during the year. Once the Act applies, it continues to apply even if employee count falls below 10. For smaller organizations, gratuity may be offered as per company policy.
What if my employer doesn't pay gratuity?
If your employer refuses or delays gratuity payment, you can file a complaint with the Controlling Authority (usually the Labour Commissioner) of your region. The employer must pay within 30 days of it becoming payable. Non-payment attracts simple interest at 10% per annum.
Is gratuity applicable for contract employees?
Contract employees are eligible for gratuity if they complete 5 years of continuous service. The Supreme Court has ruled that contract workers are entitled to gratuity under the Act. The principal employer is liable if the contractor doesn't pay.
How is service period calculated for gratuity?
Service period is calculated from the date of joining to the date of leaving. Months over 6 are rounded up to the next year (e.g., 10 years 7 months = 11 years for calculation). Months 6 or less are ignored. Approved leaves and breaks don't affect continuous service.
What is the difference between gratuity and pension?
Gratuity is a one-time lump sum payment at the end of employment based on tenure and last salary. Pension is a periodic payment (usually monthly) for life after retirement. Gratuity is governed by the Gratuity Act, while pensions are governed by separate pension schemes (like NPS, EPF).