Gratuity Calculator (Payment of Gratuity Act, India)
Calculate your gratuity payout on leaving a job after 5+ years of service. Uses the official formula under the Payment of Gratuity Act 1972 plus the ₹20 lakh tax-exempt cap.
Methodology. For employers covered under Payment of Gratuity Act 1972: Gratuity = (Last Basic + DA) × 15/26 × years of service. For non-covered: Gratuity = (Avg last 10-month Basic + DA) × 15/30 × years of service. Completed service of 5+ years required (relaxed to any tenure in case of death/disability). Tax-free up to ₹20 lakh cumulative across employments (raised from ₹10L in 2018). Excess is taxed as salary at slab rate.
Gratuity exemption rules (Section 10(10))
Government vs non-government employees
Government employees: gratuity received on retirement or death is fully exempt. Non-government employees: the exemption is capped, and the calculation depends on whether you are covered by the Payment of Gratuity Act.
If covered by the Payment of Gratuity Act
The exemption is the least of:
- Actual gratuity received;
- ₹20,00,000 (the overall lifetime ceiling, raised in 2019);
- 15 days’ salary for each completed year of service, computed as (15 × last drawn salary × years of service) ÷ 26, where salary = basic + dearness allowance.
Eligibility: the 5-year rule
Gratuity is generally payable after 5 years of continuous service. This minimum is waived if service ends due to death or disablement, in which case gratuity is paid (and the death gratuity to nominees enjoys favourable treatment).
Worked example
Last drawn salary (basic + DA) ₹60,000; 20 years of service; covered by the Act. Formula amount = (15 × 60,000 × 20) ÷ 26 = ₹6,92,308. If actual gratuity received is ₹7,00,000, the exemption is the least of {₹7,00,000; ₹20,00,000; ₹6,92,308} = ₹6,92,308, and ₹7,692 is taxable.
Both regimes
The Section 10(10) exemption applies under both the old and the new tax regime. The ₹20 lakh is a lifetime cap across employers. You can estimate your figure with our gratuity calculator.