Last updated: March 2026
Using this gratuity calculator is simple and takes only a few seconds. Start by entering your last drawn basic salary plus Dearness Allowance (DA) per month. This is the base figure used in all gratuity calculations under Indian labour law. Next, enter your total years of service with the current employer. The minimum eligibility period is 5 years of continuous service. Finally, select your employment type from the dropdown: government employee, private sector covered under the Payment of Gratuity Act, or private sector not covered under the Act. The calculator instantly computes your gratuity amount, shows the tax-free portion (up to Rs 20 lakh for non-government employees), and highlights any taxable surplus.
The gratuity formula varies depending on whether you are covered under the Payment of Gratuity Act, 1972:
Government employees receive gratuity as per the Central Civil Services (Pension) Rules or equivalent state rules. The general formula is:
Gratuity = (15 × Last Drawn Salary × Years of Service) / 26
The entire gratuity amount received by government employees is fully exempt from income tax under Section 10(10)(i) of the Income Tax Act.
Establishments with 10 or more employees are covered under the Payment of Gratuity Act. The formula is:
Gratuity = (15 × Last Drawn Salary × Years of Service) / 26
Here, "Last Drawn Salary" means Basic Pay + Dearness Allowance. The divisor of 26 represents the number of working days in a month. For each completed year of service (or part thereof exceeding 6 months), 15 days' wages are payable.
Employees in organisations not covered under the Act may still receive gratuity as a contractual benefit. The common formula is:
Gratuity = (15 × Last Drawn Salary × Years of Service) / 30
The divisor of 30 (calendar days in a month) is used instead of 26, resulting in a slightly lower gratuity amount compared to the Act-covered formula.
Gratuity is a statutory benefit under the Payment of Gratuity Act, 1972. To be eligible, an employee must meet the following conditions:
Employees across all sectors — IT, manufacturing, banking, healthcare, retail — are eligible provided the establishment falls under the scope of the Act or offers gratuity as part of the employment contract.
The tax treatment of gratuity depends on the type of employee:
The maximum tax-free limit of Rs 20 lakh was revised upward from Rs 10 lakh effective 29 March 2018 via a government notification. This ceiling applies to the cumulative gratuity received from all employers during the lifetime of the employee. If you have already received gratuity from a previous employer that was tax-exempt, the remaining exemption available is Rs 20 lakh minus the previously exempt amount.
Any employee who has completed at least 5 continuous years of service with an employer is eligible for gratuity under the Payment of Gratuity Act, 1972. The Act applies to establishments with 10 or more employees, including factories, mines, oilfields, plantations, ports, railways, and shops. Employees in all roles are covered.
The 5-year rule states that an employee must complete a minimum of 5 continuous years of service with the same employer to become eligible for gratuity. However, this condition is relaxed in cases of death or disability. Courts have also ruled that 4 years and 240 days of service may qualify as 5 years in some cases.
Gratuity received by government employees is fully exempt from income tax. For private sector employees covered under the Gratuity Act, the maximum tax-free gratuity is Rs 20,00,000. Any amount exceeding this limit is taxable as income from salary. The Rs 20 lakh limit applies to cumulative gratuity received from all employers during the employee's lifetime.
If an employee dies during service, gratuity is payable to the nominee or legal heir, even if the employee has not completed 5 years of service. The amount is calculated based on the number of completed years of service. The nominee receives the amount directly if a valid nomination exists under Form F.
Yes, under Section 4(6) of the Payment of Gratuity Act, an employer can forfeit gratuity wholly or partially if the employee's services are terminated due to riotous or disorderly conduct, violence, or any offence involving moral turpitude committed during employment (provided the employee has been convicted). Gratuity cannot be forfeited for mere resignation or poor performance.
Every eligible employee must file a nomination in Form F with the employer. If the employee has a family, the nomination must be in favour of family members. An employee without a family can nominate any person but must update the nomination once they acquire a family. The nomination can be changed at any time by filing a fresh Form F.