India Gratuity Calculator

Gratuity is a one-time lump-sum payment by the employer after 5+ years of continuous service (waived for death or disability). Standard formula: (15 x last drawn basic salary x years of service) / 26. So 10 years of service at ₹50,000 basic = (15 x 50,000 x 10) / 26 = ₹2.88 lakh.

The 26 in the denominator represents working days per month after excluding 4 weekly offs. The 15 represents 15 days of salary per year of service. Years over 6 months count as a full year (so 10 years 7 months = 11 years for calculation); under 6 months rounds down.

Government employees: gratuity fully tax-free. Private sector employees covered under Payment of Gratuity Act: tax-free up to lower of (actual gratuity received, ₹20 lakh, 15-day formula amount). Private sector NOT covered under the Act: tax-free up to lower of (actual, ₹20 lakh, half-month average salary x years).

The ₹20 lakh limit was raised from ₹10 lakh in March 2018 and applies to combined gratuity from all employers across your career. Once you've used the ₹20 lakh exemption, future gratuity is fully taxable as 'income from salary'. The [India Income Tax Calculator](/india-income-tax-calculator) handles the inclusion in your annual return.

Generally requires 5 years of continuous service with one employer. 'Continuous' allows for authorised leave, illness, lockout, strike, but not unauthorised absence. Service of 6 months or more in a year counts as a full year for calculation purposes after the 5-year threshold is crossed.

Exceptions to the 5-year rule: death or disability of the employee makes gratuity payable regardless of tenure. Some employers (often IT companies, MNCs) pay gratuity on tenures shorter than 5 years as a benefit, but this isn't legally required.

Gratuity must be paid within 30 days of becoming due (typically resignation/retirement date). Delay attracts simple interest at the rate notified by central government, currently 10%. Employer must communicate the gratuity calculation in writing.

Disputes go to the Controlling Authority under the Payment of Gratuity Act. Common dispute points: definition of 'basic salary' (whether DA is included), whether unutilised leave counts, calculation of years for partial periods. Most disputes resolve at the Authority level without going to higher courts.