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Gratuity Calculator

End-of-service gratuity

Reviewed by the PaisaTools Editorial Team · Last reviewed September 2026 · Applicable to tax year 2026-27 (FY 2026-27)

Rules checked: 6 Nov 2026 · Source: Code on Social Security, 2020, s.53; CCS (Pension) Rules, 2021, rule 45

Which gratuity rules apply to you?
Your case
₹

Basic + DA (not the full CTC)

yr

5 years minimum (1 year for fixed-term staff; none on death or disablement)

mo

More than 6 months counts as a full year: 10 years 7 months is paid as 11 years

Gratuity you'll receive

₹2,88,462

Tax-free

₹2,88,462

Taxable (above ₹20L)

₹0

Tax-exemption cap

₹20,00,000

Tax-free vs taxable

  • Tax-free₹2,88,462100%
  • Taxable (above ₹20L)₹00%

Formula: (15 ÷ 26) × last salary × years

Years counted: 10 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 (tax-exemption cap); anything above is taxable.

Gratuity is a lump sum your employer pays for long service, governed by the Code on Social Security, 2020 (formerly the Payment of Gratuity Act). It uses your last drawn wages: basic + DA, plus any pay above the 50% exclusion limit, not your full CTC.

₹20 lakh is both the tax-exemption ceiling and the most the law makes an employer pay. You get more only if your employer's own scheme or contract pays it, and anything above ₹20 lakh is taxable.

Central government employees: switch to Central govt (CCS Pension Rules 2021) above. That mode uses rule 45 (¼ of basic + DA for each six-monthly period, ₹25 lakh ceiling) for retirement and for death in service.

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 (Income-tax Act, 2025, section 19, Table items 5-6; earlier s.10(10)) — with the formula carried over from the Payment of Gratuity Act, 1972 into the Code on Social Security, 2020. 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. Central government mode: retirement and death gratuity under rule 45 of the Central Civil Services (Pension) Rules, 2021 (Gazette G.S.R. 868(E), 20 December 2021; rule 22 of the CCS (Payment of Gratuity under NPS) Rules, 2021 for those who joined from 2004): ¼ × (last basic + DA) per completed six-monthly period, a fraction of three months or more counted as a period (rule 45(4)), up to 16½ times, the death-gratuity table under rule 45(1)(b), and paise rounded up. The ₹25 lakh ceiling is from DoPPW OM No. 28/03/2024-P&PW (B)/Gratuity/9559 of 30 May 2024, effective 1 January 2024 (the rule text still says ₹20 lakh). Default DA 63% from 1 July 2026 (DoE Office Memorandum No. 1/2(i)/2026-E.II(B), 29 October 2026 (Cabinet approval 28 October 2026, PIB Release ID 2329485)). Tax: government gratuity is deducted in full under the Income-tax Act, 2025, s.19 Table Sl. No. 3 with s.19(2)(g) (earlier s.10(10)(i)); private gratuity under Sl. No. 5 up to ₹20 lakh (earlier s.10(10)(ii)). Central govt gratuity: full guide

  • Applies to establishments covered by the Act; others may follow different terms.
  • Assumes ≥5 years of continuous service and the standard formula.
  • Central govt mode takes the qualifying service you enter; your service book may exclude some breaks or leave. Railways and armed forces have their own rules, and residuary gratuity (rule 45(3)) is not computed.
How is gratuity calculated?
Gratuity = (15 ÷ 26) × last drawn monthly wages (basic + DA, plus any pay above the 50% exclusion limit) × 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 received on leaving is exempt up to ₹20 lakh for non-government employees under section 19 of the Income-tax Act, 2025 (Table items 5-6; earlier s.10(10)). 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.
How is gratuity calculated for central government employees?
Under rule 45 of the CCS (Pension) Rules, 2021, retirement gratuity = ¼ × emoluments (last basic pay + DA) × completed six-monthly periods of qualifying service, up to 66 periods (16½ times emoluments) and a ₹25 lakh ceiling. A leftover 3 months or more counts as one more period. Death in service pays 2, 6, 12 or 20 times emoluments by length of service, or half of emoluments per six-monthly period from 20 years, up to 33 times. Pick "Central govt" in the calculator above. It is not taxed: section 19 of the Income-tax Act, 2025 (Table Sl. No. 3 with s.19(2)(g); earlier s.10(10)(i)).

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