Your service details
Payment of Gratuity Act 1972, Section 10(10) exemption.
How gratuity is calculated
Gratuity is a lump sum an employer pays you for long service. For employees covered by the Payment of Gratuity Act 1972, the formula is straightforward: your last drawn basic salary plus dearness allowance, multiplied by 15, multiplied by your years of service, divided by 26. The 26 reflects the working days in a month.
The rounding rule matters. Any part of your final year over six months counts as a whole year, so 10 years and 7 months is treated as 11 years, while 10 years and 4 months stays at 10. This calculator applies that rule automatically once you enter the extra months.
How much gratuity is tax-free
Under Section 10(10) of the Income Tax Act, gratuity is exempt up to a lifetime ceiling of ₹20 lakh. The exempt amount is the least of three figures: the actual gratuity received, the ₹20 lakh ceiling, and the amount worked out by the formula. Anything above the exemption is taxed as salary income. In cases of death or disablement, gratuity is fully exempt and the five-year condition does not apply.
Who is eligible
Gratuity is generally payable after five years of continuous service with the same employer. The five-year requirement is waived in the event of death or permanent disablement. If you are not covered by the Act, gratuity may still be paid under your employment terms, and the divisor becomes 30 instead of 26, which this calculator handles when you switch the toggle.
Planning your exit or retirement?
Gratuity, leave encashment and notice pay all have their own tax rules. We help you structure the exit so you keep more of it.