Calculate Your Gratuity in 10 Seconds
Built on the Payment of Gratuity Act 1972. Private, government, and PSU sectors covered with Section 10(10) tax breakdown.
Instant Result
Act Compliant
Hyderabad-Ready
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
Gratuity at a Glance
Quick reference for private sector employees covered under the Act. Basic salary only, no DA.
| Basic / Month | 5 Years | 10 Years | 15 Years | 20 Years |
|---|---|---|---|---|
| Rs. 25,000 | Rs. 72,115 | Rs. 1,44,231 | Rs. 2,16,346 | Rs. 2,88,462 |
| Rs. 40,000 | Rs. 1,15,385 | Rs. 2,30,769 | Rs. 3,46,154 | Rs. 4,61,538 |
| Rs. 60,000 | Rs. 1,73,077 | Rs. 3,46,154 | Rs. 5,19,231 | Rs. 6,92,308 |
| Rs. 1,00,000 | Rs. 2,88,462 | Rs. 5,76,923 | Rs. 8,65,385 | Rs. 11,53,846 |
The 5 Things You Must Know
Every gratuity claim in India turns on these five rules. Read them once, save yourself the surprise later.
The 5-Year Service Rule
Five continuous years with the same employer is the legal minimum. In Telangana, the Madras High Court ruling treats 4 years and 240 days as a full 5 years.
Applies in TG, AP, TN, KA
The 15/26 Math
15 days of pay for every completed year, divided by 26 (paid working days per month, excluding Sundays). Roughly half a month’s salary per year worked.
Equivalent to 0.5769 of monthly salary per year
Rs. 20 Lakh Statutory Cap
Maximum gratuity payable under the Act is Rs. 20 lakh, raised from Rs. 10 lakh in 2018. Anything above this is fully taxable as salary income.
Doubled from Rs. 10L (2018 amendment)
Section 10(10) Tax Exemption
Gratuity within the Rs. 20 lakh cap is fully tax-exempt under Section 10(10) of the Income Tax Act. Government employees: 100% exempt, no cap at all.
Same in old and new tax regime
30-Day Payment Deadline
Your employer must pay gratuity within 30 days of your last working day under Section 7. Delay carries 10% per annum simple interest, enforceable through the Controlling Authority.
File Form N at Labour Dept, Erramanzil
Which Formula Applies to You?
Three sectors, three formulas, three tax caps.
Private (Covered)
Companies with 10+ employees under the Act.
Government / PSU
Central, state, and public sector employees.
Private (Not Covered)
Establishments outside the Act, paying via internal policy.
Real Hyderabad Example
Basic Rs. 50,000 · Service 7 yrs 6 mo · Private sector, covered.
Step-by-step
- Round up. 6+ months counts as a full year (Madras HC). 7 yrs 6 mo = 8 years.
- Formula: 50,000 × 15/26 × 8.
- Solve: 50,000 × 0.5769 × 8 = Rs. 2,30,769.
- Cap check: Below Rs. 20 lakh ceiling, full amount payable.
- Tax check: Fully exempt under Section 10(10).
Are You Eligible?
| Your Situation | Eligible? | Reason |
|---|---|---|
| 5+ continuous years, same employer | Yes | Standard Section 4 rule. |
| 4 years 240 days in 5th year (Telangana) | Yes | Madras HC ruling. Applies in TG, AP, TN, KA. |
| Less than 4 years 240 days | No | 5-year rule not satisfied. |
| Death or permanent disability | Yes | 5-year rule waived. Paid to nominee or family. |
| Termination for proven misconduct | Forfeited | Section 4(6). Moral turpitude exception. |
| Resignation during notice period | Yes | If 5-year service complete. Notice counts as service. |
| Contract employee, 5+ years | Yes | Covered if principal employer falls under the Act. |
Tax on Gratuity
Section 10(10) of the Income Tax Act. Same in old and new tax regimes.
Is Gratuity Part of Your CTC?
Yes. Most Indian employers add 4.81% of Basic salary as a monthly provision to your CTC.
Example: Basic Rs. 40,000 → Rs. 40,000 × 12 × 4.81% = Rs. 23,088 per year shown in your CTC.
See your true in-hand: CTC Calculator. Telangana deductions: Professional Tax Telangana. Automate it all: Payroll Software Hyderabad.
When Will You Get Paid?
Payment of Gratuity Act timelines. Telangana enforcement runs through the State Labour Department.
Gratuity becomes payable on your last day, resignation or termination.
Section 7 deadline. Full amount due within 30 days.
Simple interest at 10% per annum on unpaid amount.
Submit to Controlling Authority, Labour Commissioner, Erramanzil, Hyderabad. No advocate needed.
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 under the Payment of Gratuity Act 1972.
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, 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 treats 240 plus 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 identical under both new and old tax regimes. Government employees get 100 percent exemption. Private sector employees covered by the Act get exemption up to Rs. 20 lakh lifetime. Private employees not covered by the Act get exemption up to Rs. 10 lakh lifetime.
What if I worked for multiple employers?
The Rs. 20 lakh (or Rs. 10 lakh) exemption is a lifetime cap across all employers. 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. The remaining Rs. 7 lakh is taxable as salary income.
Is gratuity part of CTC?
Yes, most Indian employers include gratuity at 4.81 percent 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.
Who is the nominee for my gratuity?
You can nominate one or more family members using Form F under the Payment of Gratuity Act. The nominee receives the full gratuity amount in case of your death, with the 5-year service rule waived. Update Form F whenever your family status changes (marriage, divorce, child birth).
Is TDS deducted on gratuity payment?
No TDS is deducted if your gratuity is fully tax-exempt under Section 10(10), which is the case for most employees within the Rs. 20 lakh cap. If your gratuity exceeds the exemption limit, the employer deducts TDS on the taxable portion at your applicable income tax slab rate.
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