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Gratuity Calculator

Updated for FY 2026–27. Last Updated: July 2026. Calculate your separation and retirement gratuity instantly using formulas u/s Payment of Gratuity Act 1972.

Last Updated: July 2026Verified By: GSTWaala Editorial Team
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Reviewed: GSTWaala Editorial Team & Separation Experts Updated: July 2026 Rules: Payment of Gratuity Act 1972 & Section 10(10)Free & No Registration Mobile-Friendly Layout
Disclaimer: Calculations are based on the latest Indian Income Tax provisions (including updates u/s Finance Act 2024). This tool is intended for educational guidance only and does not constitute formal financial, investment, or legal advice.
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Gratuity Calculation Inputs

How to Use the Gratuity Calculator

  1. Select your company type (Private, Government, or PSU) and check if you are covered under the Payment of Gratuity Act 1972.
  2. Input your Monthly Basic Salary and Dearness Allowance (DA) as stated in your exit or current salary slips.
  3. Enter your Years of Service and Months of Service. The calculator automatically rounds up or down according to Act specifications.
  4. Indicate whether your service was continuous. A minimum of 5 years of continuous service is legally required to qualify.
  5. View the generated gratuity estimation, tax-free exemption portion u/s 10(10), taxable portion, and vertical step flow.

Mathematical Formula & Calculations

Reviewed by GSTWaala Editorial Team•Based on Current Indian Income Tax Rules•Last Updated: July 2026
Editorial Policy:All separation calculations are reviewed by labor law consultants and payroll leads.
Calculation Accuracy:Our formulas strictly follow Section 4 of the Payment of Gratuity Act 1972.
Disclaimer:Exemptions depend on historical claims. Consult your payroll manager or a CA for final settlements.

6 Worked Examples of Gratuity Calculation

Example 1: Private Employee (Covered) - 6 Years

Scenario: Private company employee covered under the Act. Salary basic+DA: ₹40,000. Service period: 5 years 9 months.

  • Service rounded up: 6 Completed Years
  • Formula: (40,000 × 15 × 6) ÷ 26
  • Gratuity Payout: ₹1,38,462
  • Tax Exemption u/s 10(10): 100% Tax-Free (under ₹20L cap)
Example 2: Private Employee (Not Covered) - 6 Years

Scenario: Same employee but company is not covered under the Act. Service period: 5 years 9 months.

  • Months discarded: 5 Completed Years
  • Formula: (40,000 × 15 × 5) ÷ 30
  • Gratuity Payout: ₹1,00,000
  • Tax Exemption u/s 10(10): 100% Tax-Free (under ₹20L cap)
Example 3: Government Employee - 15 Years

Scenario: Central Government officer. Salary basic+DA: ₹80,000. Service period: 15 years.

  • Formula: Government pensions scheme rules apply.
  • Gratuity Payout: ₹6,00,000
  • Tax Exemption u/s 10(10)(i): Completely Tax-Free (no cap limits)
Example 4: Government Employee - 25 Years

Scenario: Retiring State Government employee. Salary basic+DA: ₹1,50,000. Service period: 25 years.

  • Gratuity Payout: ₹18,75,000
  • Tax Exemption u/s 10(10)(i): 100% Tax-Free (exempted category)
Example 5: PSU Employee - 15 Years

Scenario: Separation payout at a Public Sector Undertaking. Salary basic+DA: ₹1,20,000. Service: 15 years 3 months.

  • Service Years Counted: 15 Completed Years
  • Formula: (1,20,000 × 15 × 15) ÷ 26
  • Gratuity Payout: ₹10,38,462
  • Tax Exemption: 100% Tax-Free (exempted category)
Example 6: Private Employee (Covered) - 25 Years

Scenario: Salaried private executive. Salary basic+DA: ₹2,60,000. Service: 25 years.

  • Formula: (2,60,000 × 15 × 25) ÷ 26
  • Gross Gratuity: ₹37,50,000
  • Tax-Free Amount: ₹20,00,000 (Maximum Private Cap)
  • Taxable Portion: ₹17,50,000 (Taxed at slab rates)

Who Should Use This Tool?

Salaried Employees

Check your accrued gratuity reserves before switching employers, planning early retirement, or negotiating resignation payouts.

HR Professionals

Instantly cross-verify separation final settlements, employee gratuity sheets, and compliance calculations u/s Payment of Gratuity Act.

Employers & Founders

Estimate aggregate future separation gratuity liabilities and structure legal reserve funds for audits or accounting provisions.

Retirement Planners

Factor in tax-exempt separation allowances to map future capital cashflows and retirement wealth strategies.

Employees Changing Jobs

Verify if your service period qualifies for exit gratuity and calculate the tax-free exemption portion of your payout.

Payroll Teams

Ensure separation slips contain precise tax splits (tax-free exemption vs taxable portion) u/s Section 10(10).

Ultimate Guide: Payment of Gratuity Act Rules, Formulas & Tax Exemption

1. What is Gratuity in India?

Gratuity is a financial retirement benefit paid by employers to employees who have contributed long-term service to the organization. Governed u/s the Payment of Gratuity Act 1972, it functions as a statutory retirement benefit plan. Gratuity applies to all factories, mines, oilfields, plantations, ports, railways, shops, and corporate establishments employing 10 or more people.

2. Eligibility Rules & 5 Years Threshold

To be legally entitled to gratuity, an employee must satisfy these criteria:

  • Continuous Employment: The employee must have served the company continuously without unauthorized breaks.
  • Minimum Service: A minimum service period of 5 years (60 months) is mandatory.
  • Exception Clauses: The 5-year completion threshold is waived if employment is terminated due to death, disablement, or serious occupational disease.

3. Act Covered vs. Non-Covered Calculation

Calculations split depending on company status:
- **Covered u/s Act 1972:** Gratuity is computed using a 26-day working month cycle. Fractional months exceeding 6 are rounded up.
- **Not Covered u/s Act:** Gratuity uses a 30-day cycle based on the average salary of the last 10 months. Only fully completed years are counted.

4. Tax Exemptions u/s Section 10(10)

Exemption rules distinguish between public and private employment sectors:

  • Government & PSU: Completely tax-exempt under Section 10(10)(i). No maximum exemption ceiling applies.
  • Private Sector: Capped u/s 10(10)(iii) at a maximum lifetime limit of ₹20 Lakh. Any gratuity received exceeding this limit is added to the year's total salary and taxed according to the employee's income tax slabs.

5. Official Reference Links

For official legal drafts, notifications, and compliance templates, consult government portals:

6. Related Financial Tools

Salary Breakup CalculatorHRA Exemption CalculatorIncome Tax CalculatorOld vs New RegimeAdvance Tax CalculatorCapital Gains Calculator

Frequently Asked Questions

Gratuity is a statutory separation benefit paid by an employer to an employee u/s Payment of Gratuity Act 1972 as a token of appreciation for their continuous service.
To be eligible for gratuity, an employee must have rendered continuous service of at least 5 years (60 months) with the same employer.
For employees covered under the Act, the formula is: Gratuity = (Monthly Basic + DA) × 15 × Years of Service ÷ 26. A year is rounded up if months completed exceed 6.
For non-covered employees, the formula is: Gratuity = (Monthly Basic + DA) × 15 × Completed Years of Service ÷ 30. Fractional months are ignored.
For government and PSU employees, gratuity is completely tax-exempt. For private-sector employees, it is tax-free up to a statutory limit of ₹20 Lakh (with any excess taxed as per individual slabs).
Normally, the law mandates 5 completed years. However, various high court rulings hold that under the Payment of Gratuity Act, a service period of 4 years and 240 days (or 190 days in mining/seasonal factories) counts as 5 years.
Under Section 4(6) of the Act, an employer can forfeit gratuity only if the employee's services were terminated due to willful omission, riotous conduct, or causing damage to properties.
The maximum statutory limit for tax-free gratuity in the private sector is capped u/s 10(10) at ₹20 Lakh (₹20,00,000) during a lifetime.
Yes. Contractual employees on a company's payroll are eligible for gratuity if they complete 5 years of continuous service. Freelancers or third-party contractors are usually excluded.
The employer must pay the gratuity amount within 30 days from the date it becomes payable (usually the employee's last working day). If delayed, interest u/s 7(3A) is payable.
Yes. Both the Payment of Gratuity Act and the Income Tax Act state that the salary base for calculation must equal Basic Salary plus Dearness Allowance (DA). HRA and other perks are excluded.
The Payment of Gratuity Act 1972 applies to every shop, establishment, or factory where 10 or more employees are employed on any day of the preceding 12 months.
None. Gratuity is treated as salary income u/s 10(10) and has no connection with Capital Gains schemes u/s 54.
The 5-year requirement is waived u/s 4(1) in the unfortunate event of the employee's death or permanent disablement.
Calculations run entirely client-side via our math engine, ensuring instant results on any device with zero server overhead.
No. Central and State Government employees, along with local authorities, enjoy unlimited tax exemption u/s 10(10)(i) for retirement gratuity.
No. Gratuity is fully funded by the employer as a separation benefit. It cannot be deducted from your monthly gross pay, though it may form part of the overall CTC structure.
Provident Fund (PF) is a joint savings scheme funded by both employee and employer monthly. Gratuity is a one-time exit payment funded entirely by the employer upon completion of 5+ years.
Yes. Every employee must file a nomination (Form F) within 30 days of completing one year of service, ensuring the payout reaches nominees in case of death.
No. Gratuity must be paid as a lump sum within 30 days of separation unless the employee consents to an alternative structure.

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Compliance Note

All calculations are updated to reflect the tax codes, slabs, and deductions in effect for Financial Year 2025-26 (Assessment Year 2026-27). This tool runs entirely client-side; no data is transmitted or stored on our servers.
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