Gratuity Calculator India (2026) – Calculate Your Gratuity Payout & Tax Exemption
Calculate your statutory gratuity payout under the Payment of Gratuity Act, 1972. View accurate calculations based on your last drawn basic salary, tenure rounding rules, and tax-free limits.
Enter Gratuity Details
Payment of Gratuity Act 1972Note: If additional months > 6, it automatically rounds up to 1 full additional year per Indian labor rules.
All calculations and financial outputs on SalaryGrid are estimates based on prevailing Indian statutory rules and standard mathematical formulas. Actual numbers may vary based on individual employer compensation policies, state-specific professional taxes, non-taxable allowances, and official banking terms. Always consult a qualified Chartered Accountant (CA) or certified financial planner before making legal or tax decisions.
Calculation Formula & Breakdown
What is Gratuity and Who is Eligible in India?
Gratuity is a lump-sum statutory benefit paid by an employer to an employee in recognition of long-term continuous service. It is mandated under the Payment of Gratuity Act, 1972 across all private and public establishments, factories, mines, ports, and commercial firms employing 10 or more individuals.
5 Years Continuous Service
You must complete a minimum of 5 full years of continuous service with the same organization to qualify for gratuity upon resignation, retirement, or voluntary separation.
6-Month Rounding Rule
After crossing 5 years, any fractional service period exceeding 6 months is rounded up to 1 full additional year (e.g. 6 years & 7 months is calculated as 7 full years).
₹20 Lakh Tax Exemption
Under Section 10(10), gratuity received by private-sector employees up to a lifetime ceiling of ₹20,00,000 is 100% exempt from income tax.
The Statutory Gratuity Formula (15/26 Explained)
For all employees covered under the Payment of Gratuity Act, the mathematical formula is:
Why Divide by 26?
Indian labor law assumes 26 working days in a calendar month (excluding 4 Sundays). Dividing monthly basic pay by 26 calculates your exact per-day wage rate.
Why Multiply by 15?
The Act mandates 15 days of wages for every completed year of service. Multiplying your daily wage rate by 15 gives your annual gratuity entitlement.
Gratuity Payouts at Key Career Milestones
How many months of basic salary you receive upon completing different tenures:
Minimum eligibility reached. You receive ~2.88 months of your last drawn basic salary.
A decade of service yields nearly 6 months of basic salary as a tax-free payout.
Mid-career tenure yields nearly 9 months of basic pay upon resignation.
Senior milestone delivers nearly 1 year (11.54 months) of basic salary.
Real-World Gratuity Calculation Examples
Sample payouts across different salary scales and service tenures:
Example 1: Mid-Level
7 YearsExample 2: Senior Manager
12 YearsExample 3: Executive Lead
20 YearsAll calculations adhere strictly to Section 4 of the Payment of Gratuity Act, 1972 and the Central Government notification raising the maximum tax-free gratuity exemption ceiling under Section 10(10) to ₹20,00,000.
Frequently Asked Questions
Clear answers regarding gratuity eligibility, 15/26 formulas, resignation payouts, and tax exemptions.
What is the 5-year continuous service rule for gratuity?
Under Section 4(1) of the Payment of Gratuity Act 1972, an employee is legally entitled to gratuity only after completing at least 5 years of continuous service with the same employer. If you resign before completing 5 years, you forfeit the gratuity benefit. The only exceptions are death or permanent disablement of the employee, where the 5-year service requirement is waived.
What is the official statutory formula for gratuity calculation?
For employees covered under the Payment of Gratuity Act, the formula is: Gratuity = (15 × Last Drawn Basic Salary + DA × Completed Years of Service) ÷ 26. Here, 26 represents the official working days in a month (excluding 4 Sundays), and 15 represents 15 days of wages for every completed year of service.
How does the 6-month rounding rule work in gratuity calculation?
If your tenure in the final year of service exceeds 6 months (e.g. 7 years and 7 months), it is rounded up to the next full year (8 years). If your tenure is 6 months or less (e.g. 7 years and 4 months), it is rounded down (7 years). However, this rounding applies only AFTER you have crossed the mandatory 5-year eligibility threshold (e.g., 4 years and 9 months does NOT qualify for gratuity).
Is gratuity received upon job resignation taxable?
Under Section 10(10) of the Income Tax Act, gratuity received by private-sector employees covered under the Act is 100% tax-free up to a cumulative lifetime limit of ₹20 Lakhs (raised from the earlier ₹10 Lakh ceiling). Any amount received in excess of ₹20 Lakhs is added to taxable salary income.
Is gratuity deducted from my monthly salary?
No. Gratuity is completely funded and paid by the employer. While employers include an estimated gratuity provision (approx 4.81% of Basic Salary) on annual CTC offer letters, it is not deducted from your monthly gross pay.
All calculations and financial outputs on SalaryGrid are estimates based on prevailing Indian statutory rules and standard mathematical formulas. Actual numbers may vary based on individual employer compensation policies, state-specific professional taxes, non-taxable allowances, and official banking terms. Always consult a qualified Chartered Accountant (CA) or certified financial planner before making legal or tax decisions.
Related Tools & Calculators
CTC to In-Hand Salary Calculator
Calculate exact monthly take-home salary from annual CTC after PF, Professional Tax, and Income Tax breakdown.
EPF / PF Calculator
Calculate Employee Provident Fund (EPF) monthly contribution, employer share, EPS pension, and total accumulated interest corpus.
Notice Period & Last Working Day Calculator
Calculate exact last working day from resignation date for 30, 45, 60, 90 days notice periods in India.