Gratuity Calculator India 2026

Gratuity is a retirement benefit paid by employers under the Payment of Gratuity Act, 1972. Eligibility: completion of 5 years of continuous service. Payable on retirement, resignation, death, or disability. Applicable to establishments with 10+ employees.

For employees covered under Gratuity Act: Gratuity = (Last drawn salary × 15 × years of service) ÷ 26. For employees NOT covered: Gratuity = (Last drawn salary × 15 × years of service) ÷ 30. Salary = basic + dearness allowance.

The maximum gratuity limit is ₹20 lakhs (revised from ₹10L in 2018). For government employees and PSU workers, the limit is ₹20 lakhs. Private sector employers may pay higher voluntarily. The ₹20L ceiling is for tax-free treatment.

Gratuity is fully tax-free for government employees. For private sector: exempt up to ₹20 lakhs (whichever is lower: ₹20L, actual gratuity received, or formula-based gratuity). Amount above ₹20L is taxable as salary income.

Gratuity is calculated on last drawn basic salary + dearness allowance (DA) only. HRA, bonus, commission, and other allowances are NOT included. Most private companies without DA calculate gratuity on basic salary only.

In case of employee death, gratuity is paid to the nominee or legal heir. The 5-year service condition is waived. The amount is calculated based on years of service. If death is due to accident/disease, enhanced gratuity may apply as per company policy.