Gratuity calculator
Find out how much gratuity is due on leaving, whether it's payable yet, and how much of it is tax-free.
Free calculators · Last reviewed: November 2026. Rules for FY 2026-27.
Gratuity
₹1,38,462
Tax-free up to ₹20,00,000 in a lifetime.
| Basic + DA | ₹40,000 |
|---|---|
| Service counted | 6 years |
| Formula | ₹40,000 × 15/26 × 6 |
| Gratuity | ₹1,38,462 |
| Tax-free (up to ₹20 lakh) | ₹1,38,462 |
| Taxable | ₹0 |
This is an estimate for planning, not tax or legal advice. Your employer's payroll, your declarations and state rules can change the actual figures.
How it's calculated
For an employer covered by the Payment of Gratuity Act, now part of the Code on Social Security, 2020:
Gratuity = last Basic + DA × 15 / 26 × years- Years: completed years, plus one more if the extra part-year is over six months (exactly six months doesn't count)
- Payable after 5 years of continuous service; after 1 year for fixed-term employees; at any time on death or disablement
- Statutory cap and lifetime tax-free limit: ₹20 lakh
For an employer not covered by the law, the tax-free amount is average Basic + DA of the last 10 months × 15 / 30 × completed years, with part-years ignored.
Under the labour codes, wages for gratuity are Basic, DA and retaining allowance. If allowances make up more than half of total pay, the excess is added to wages, which can raise gratuity.
Questions
What is the gratuity formula?
For employers covered by the law: last drawn monthly Basic + DA × 15/26 × years of service. 15 is fifteen days' wages for each year and 26 is the number of working days in a month. For ₹40,000 and 6 years: 40,000 × 15/26 × 6 = ₹1,38,462.
Does 4 years 7 months count as 5 years?
In the amount, a final part-year of more than six months counts as a full year, so 4 years 7 months is paid as 5. But gratuity on resignation needs 5 years of continuous service first. Some High Courts have counted 4 years plus 240 working days in the fifth year as enough, so check your case.
Who can get gratuity before 5 years?
Fixed-term employees qualify after 1 year under the Code on Social Security, in force since 21 November 2025. On death or disablement, gratuity is payable whatever the length of service.
What is the maximum gratuity, and is it taxable?
A covered employer has to pay at most ₹20 lakh. For private-sector employees, gratuity is tax-free up to ₹20 lakh in a lifetime, across all employers. Anything above that is taxed as salary.
What if my employer isn't covered by the Gratuity Act?
The law covers establishments with 10 or more employees. A smaller employer may still pay gratuity. Its tax-free limit is half a month's average Basic + DA over the last 10 months for each completed year, which is the 15/30 option in the calculator.
When must gratuity be paid?
Within 30 days of it becoming payable, usually the last working day. If it is late, the employer owes simple interest for the delay.
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