Gratuity Calculator
End-of-service gratuity
Reviewed by the PaisaTools Editorial Team · Last reviewed September 2026 · Applicable to FY 2026-27 (AY 2027-28)
How to use: Enter your last monthly basic+DA and your completed years of service.
Example₹50,000 salary, 10 years → ₹2,88,462 gratuity (tax-free)
Basic + DA (not the full CTC)
5 years minimum (1 year for fixed-term staff); >6 months counts as a full year
Gratuity you'll receive
₹2,88,462
Tax-free
₹2,88,462
Taxable (above ₹20L)
₹0
Tax-free vs taxable
- Tax-free₹2,88,462100%
- Taxable (above ₹20L)₹00%
Formula: (15 ÷ 26) × last salary × years
The 15/26 reflects 15 days' wages for each completed year, on a 26-working-day month. Gratuity up to ₹20 lakh is tax-free; anything above is taxable.
Gratuity is a lump sum your employer pays for long service, governed by the Payment of Gratuity Act. It uses your last drawn basic + DA, not your full CTC.
The ₹20 lakh figure is the tax-exemption ceiling — your actual payout can be higher, but the excess is taxable.
Gratuity is computed as (15 ÷ 26) × last drawn salary (basic + DA) × years of service, with part-years over six months rounded up and a ₹20 lakh lifetime tax-free ceiling — as set out in the Payment of Gratuity Act, 1972. Eligibility requires five years of continuous service for permanent employees, and one year for fixed-term employees under the Code on Social Security, 2020 (in force from 21 November 2025), which also counts at least 50% of total pay as wages for this calculation.
- Applies to establishments covered by the Act; others may follow different terms.
- Assumes ≥5 years of continuous service and the standard formula.
- How is gratuity calculated?
- Gratuity = (15 ÷ 26) × last drawn monthly salary (basic + DA) × completed years of service. The 15/26 means 15 days' wages per year on a 26-day working month.
- Who is eligible for gratuity?
- Permanent employees need at least 5 years of continuous service with a covered employer. Fixed-term employees qualify after one year under the Code on Social Security, 2020, in force since 21 November 2025. The service requirement is waived on death or disablement.
- Is gratuity taxable?
- Gratuity up to ₹20 lakh is fully tax-free for non-government employees. Anything above ₹20 lakh is added to your income and taxed.
- How are partial years counted?
- More than 6 months in the final year counts as a full year; 6 months or less is dropped. So 10 years 7 months = 11 years.
Related guides
Writing about this? Put the calculator in your article
Free for any site. One line of HTML, no signup, no ads, and we keep the rates and rules current so you never have to.
Related tools
All Tax & Salary tools →EPF Withdrawal Tax Calculator
What a PF withdrawal before five years actually costs — the three heads it splits across, and why TDS is not the tax
Salary Decoder
One CTC in — in-hand, tax regime, SIP, rent & loan headroom out
Which ITR Form?
Answer a few questions, get the right ITR form and the rule behind it