Gratuity Calculator India 2026
Calculate your gratuity payout under the Payment of Gratuity Act 1972. Get your eligible amount, tax-exempt portion, and taxable portion in 10 seconds.
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Updated FY 2026-27
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Private + Government sector
Most private companies with 10+ employees fall under the Act. If unsure, ask your HR or check your offer letter.
Your details
(Basic + DA) × 15/26 × Years of service
How Is Gratuity Calculated in India?
Gratuity in India follows the Payment of Gratuity Act 1972. Three different formulas apply based on your employer type. The calculator above auto-picks the right one.
Formula 1 — Private sector covered under the Act
Most private employers with 10+ employees fall here.
- 15 / 26 represents 15 days of pay for every completed year, calculated on a 26-day working month.
- Years of service: any service of 6 months or more in the final year counts as a full year (Surendra Kumar Verma case ruling).
- Maximum payout: capped at Rs. 20,00,000 under the 2018 amendment.
- Tax treatment: exempt under Section 10(10)(ii) up to Rs. 20 lakh lifetime limit.
Formula 2 — Private sector NOT covered under the Act
Some smaller companies (under 10 employees) opt out of the Act. They still pay gratuity through company policy but use a different formula.
- “Avg salary” includes basic + DA + commission paid as % of turnover.
- Only fully completed years count — partial years are ignored.
- Tax treatment: exempt under Section 10(10)(iii) up to Rs. 10,00,000 lifetime limit.
Formula 3 — Government and PSU employees
Central and state government employees, defence personnel, and PSU staff get a different treatment.
- The Rs. 20 lakh cap does NOT apply.
- Tax treatment: 100% exempt under Section 10(10)(i). No tax at all.
Worked Example: 8 Years at Rs. 50,000 Basic in Hyderabad
Suppose you worked 7 years 6 months at a Madhapur IT company with a final-month basic salary of Rs. 50,000 (no DA). Under the Act:
Completed years: 7 + 1 (6 months counts as full year) = 8 years
Gratuity = 50,000 × 15/26 × 8 = Rs. 2,30,769
Statutory cap check: Rs. 2,30,769 < Rs. 20,00,000 → full amount paid.
Tax exempt: Rs. 2,30,769 (within Rs. 20 lakh lifetime limit).
Taxable portion: Rs. 0.
Take-home gratuity: Rs. 2,30,769
Gratuity Eligibility Rules
| Scenario | Eligible? | Reason |
|---|---|---|
| 5 or more continuous years | Yes | Standard eligibility under Sec 4(1) |
| 4 years and 240+ days in 5th year | Yes | Treated as 5 full years (Madras HC ruling, applies in TN, KA, AP, TG) |
| Less than 5 years | No | Below statutory minimum |
| Death or disability before 5 years | Yes | 5-year rule waived under Sec 4(1) proviso |
| Termination for misconduct | No | Forfeited under Sec 4(6) |
| Resignation during notice period | Yes | If 5-year condition is met |
When Does Your Employer Have to Pay?
Under the Payment of Gratuity Act, your employer must pay gratuity within 30 days of the date it becomes payable (your last working day, retirement, or death). If they delay beyond 30 days, the employer pays simple interest at 10% per annum on the unpaid amount.
If your employer refuses or delays, you can file a Form N application with the Controlling Authority under the Act in your state. In Telangana, that is the Labour Department office at Erramanzil, Hyderabad. The Controlling Authority’s decision is enforceable as a civil court decree.
Frequently Asked Questions
How is gratuity calculated for 7 years of service?
For 7 years at Rs. 50,000 monthly basic (no DA) under the Payment of Gratuity Act: 50,000 × 15/26 × 7 = Rs. 2,01,923. This entire amount is tax-exempt under Section 10(10) since it falls within the Rs. 20 lakh lifetime cap.
What is the 15 / 26 in the gratuity formula?
15 represents 15 days of pay per completed year of service. 26 is the standard number of paid working days in a month (excluding Sundays). Together, 15/26 means roughly half a month’s pay for every year worked.
Is gratuity payable if I quit before 5 years?
No, the Payment of Gratuity Act requires 5 continuous years of service. The only exceptions are death or permanent disability of the employee, where the 5-year rule is waived. Some private companies pay gratuity earlier through their own policy, but this is voluntary, not legally required.
Does the 4 years 240 days rule apply in Telangana?
Yes. The Madras High Court ruling (Mettur Beardsell Ltd v Regional Labour Commissioner) treats 240+ days in the 5th year as equivalent to a full year for gratuity purposes. This applies across Tamil Nadu, Karnataka, Andhra Pradesh, and Telangana. Outside the south, employers may interpret the law more strictly, requiring exactly 5 full years.
How is gratuity taxed under the new tax regime?
Tax treatment of gratuity is the same under both new and old tax regimes. Government employees get 100% exemption (Sec 10(10)(i)). Private sector employees covered by the Act get exemption up to Rs. 20 lakh lifetime (Sec 10(10)(ii)). Private employees not covered by the Act get exemption up to Rs. 10 lakh lifetime (Sec 10(10)(iii)).
What if I worked for multiple employers?
The Rs. 20 lakh (or Rs. 10 lakh) exemption is a lifetime cap across all employers. So if you received Rs. 12 lakh tax-exempt gratuity from your first employer and now receive Rs. 15 lakh from your second, only Rs. 8 lakh of the second payout will be tax-exempt (taking total to Rs. 20 lakh). The remaining Rs. 7 lakh is taxable as salary income.
Is gratuity part of CTC?
Yes, most Indian employers include gratuity (4.81% of annual basic) inside the Cost to Company figure. However, the actual gratuity is only paid out after you complete 5 continuous years. If you exit before 5 years, the CTC line item for gratuity stays unpaid. Use our CTC calculator to see how gratuity fits into your offer.
Related Tools
Need More Than a Calculator?
Calculators show you the numbers. factoHR Hyderabad files Telangana PT, PF, ESI, and TDS for your team. Form 16, gratuity provisioning, and Form 24Q in one platform. From Rs. 4,999/month for 50 employees.
