Gratuity Calculator

For employers covered by the Payment of Gratuity Act (≥10 employees):

Gratuity = (15 × Last drawn monthly basic + DA × Years of service) / 26

The divisor 26 represents working days in a month (excluding Sundays). Fractional service of 6 months or more rounds up to the next completed year.

For non-covered employers (<10 employees, voluntary scheme):

Gratuity = (15 × Average salary of last 10 months × Years of service) / 30

Only completed years count; there's no rounding-up for fractional months.

Government employees: Fully tax-exempt with no upper limit.

Private-sector employees: Tax-exempt up to ₹20 lakh — this cap was raised from ₹10 lakh by the Union Budget 2018 amendment. Any amount above ₹20 lakh is taxable as "Salary" income at your applicable slab rate.

For non-covered employers, the tax exemption is the minimum of: actual gratuity received, ₹20 lakh, the statutory formula amount, or half month's average salary × completed years of service.

"Last drawn salary" means Basic salary + Dearness Allowance (DA) only. It does NOT include:

• House Rent Allowance (HRA)
• Bonus or commissions
• Overtime pay
• Conveyance allowance
• Any other allowances or perquisites

Use the monthly figure from your final payslip before separation. For non-covered employers, the formula uses the average of the last 10 months instead of the very last month.

Generally no — the statutory minimum is 5 years of continuous service. There are two exceptions:

1. Death or total disability — the 5-year requirement is waived; the employee or nominee receives gratuity for completed years.
2. 4 years and 240 days rule — per the Madras High Court ruling, completing 240 days in the 5th year qualifies. Most employers accept this but it is not codified.

Some employers also offer ex-gratia or "gratuity-like" lump sums voluntarily before 5 years, at their discretion — this is not statutory gratuity and is not eligible for the ₹20 lakh tax exemption.