EaseValueUnder the Payment of Gratuity Act, gratuity is payable after 5 years of continuous service and is calculated as 15 days of last-drawn salary for every completed year of service — (15 × last salary × years) ÷ 26. This calculator works out the amount and flags anything above the ₹20 lakh tax-exempt limit.
How it’s calculated
- Formula (Act-covered employees): Gratuity = (15 × last drawn monthly salary × years of service) ÷ 26, where salary = Basic + DA.
- A period of service over 6 months in the final year is rounded up to a full year; 6 months or less is ignored.
- Gratuity is tax-exempt up to ₹20,00,000 in a lifetime; any amount above that is taxable as salary.
- Gratuity is generally payable only after 5 years of continuous service (except on death or disability).
Frequently asked questions
How is gratuity calculated?
For employees covered by the Payment of Gratuity Act, gratuity = (15 × last drawn salary × years of service) ÷ 26, where salary is Basic + DA. 15/26 represents 15 days out of a 26-day working month.
Is gratuity taxable?
Gratuity is exempt up to ₹20,00,000 over your lifetime. Any amount received above this cumulative limit is taxable under the head Salary.
After how many years is gratuity payable?
Gratuity is payable after 5 years of continuous service. This condition is waived if service ends due to death or disablement.
Is a year over 6 months rounded up?
Yes. If you have served more than 6 months in the final year, it is treated as a full year. 6 months or less is not counted.
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