Gratuity Calculator India 2025
Payment of Gratuity Act 1972 · Private & Government employees · Tax-free limit ₹20 lakh
Enter Your Details
Basic + DA salary, years of service, and employee type
Can be decimal (e.g. 10.5)
Your Gratuity vs Tax-Free Limit (₹20 Lakh)
Taxable Gratuity Alert
Government employees receive fully tax-free gratuity with no upper limit under Section 10(10)(i) of the Income Tax Act.
Step-by-Step Calculation
Detailed Inputs
Separate Basic & DA, joining/leaving dates, and employee settings
Salary Details
Service Period
Options
Government = fully tax-free
Your Gratuity vs Tax-Free Limit (₹20 Lakh)
Taxable Gratuity Alert
Government employees receive fully tax-free gratuity with no upper limit under Section 10(10)(i).
Step-by-Step Calculation
CTC Gratuity Provision (Employer sets aside ~4.81% of Basic+DA)
Year-by-Year Gratuity Accrual
| Year | Rounded Yrs | Gratuity (Covered) | Gratuity (Non-Covered) | Tax Status |
|---|
Scenario Comparison: Gratuity at Different Tenures
| Tenure | Rounded Yrs | Gratuity Amount | Tax-Free | Taxable |
|---|
Gratuity Formulas — Quick Reference
Gratuity = (Basic+DA ÷ 26) × 15 × Years
Divisor 26 = working days/month
Gratuity = (Basic+DA ÷ 30) × 15 × Years
Divisor 30 = calendar days/month
Years rounded: ≥7 months in partial year → round up | Tax-free limit: ₹20,00,000 (private, 2023) | Govt employees: fully tax-free | CTC provision rate: 4.81% of Basic+DA
Worked Examples
Junior Employee — 5 Years
Basic+DA ₹30,000/mo, 5 yrs service, covered under Act
= ₹1,153.85
Gratuity = 1,153.85 × 15 × 5
= ₹86,538
Fully tax-free (below ₹20L limit)
Mid-Level — 10 Years
Basic+DA ₹70,000/mo, 10 yrs service, covered under Act
= ₹2,692.31
Gratuity = 2,692.31 × 15 × 10
= ₹4,03,846
Fully tax-free (below ₹20L limit)
Senior — 20 Years
Basic+DA ₹1,50,000/mo, 20 yrs service, covered under Act
= ₹5,769.23
Gratuity = 5,769.23 × 15 × 20
= ₹17,30,769
Fully tax-free (below ₹20L limit)
Understanding Gratuity in India
Gratuity is one of the most significant post-employment benefits for Indian workers. It is a statutory payment made by employers to employees as recognition of their long-term loyalty and service. Governed primarily by the Payment of Gratuity Act, 1972, the benefit applies to establishments with 10 or more employees and kicks in after an employee completes a minimum qualifying period of service.
What is the Payment of Gratuity Act, 1972?
The Payment of Gratuity Act, 1972 is a central legislation that mandates the payment of gratuity to employees upon retirement, resignation, superannuation, death, or disablement. The Act covers factories, mines, oilfields, plantations, ports, railway companies, shops, and other establishments. Once an establishment comes under the Act, it continues to be governed by it even if the number of employees later falls below 10.
The Gratuity Formula Explained
The calculation methodology differs based on whether the employee falls under the Gratuity Act or not:
- Covered employees (Act applies): The divisor is 26, representing the number of working days in a month. The formula is: Gratuity = (Last drawn Basic + DA) ÷ 26 × 15 × Rounded years of service.
- Non-covered employees: The divisor is 30, representing the number of calendar days in a month. The formula is: Gratuity = (Last drawn Basic + DA) ÷ 30 × 15 × Years of service.
The factor of 15 represents 15 days of salary for every completed year of service — the statutory entitlement under the Act.
How Years of Service are Rounded
A key nuance in gratuity calculation is how fractional years of service are handled. If the excess months in the last year of service are 7 or more, the year is rounded up to the next full year. If fewer than 7 months, the fraction is ignored. For example:
- 5 years 8 months → treated as 6 years
- 5 years 3 months → treated as 5 years
- 10 years 6 months 15 days → treated as 11 years (since the 6+ months with days tips it over)
Tax Treatment of Gratuity — Section 10(10)
Gratuity received by employees is governed by Section 10(10) of the Income Tax Act, 1961. The tax treatment varies by employee category:
| Employee Category | Tax-Free Limit | Remarks |
|---|---|---|
| Government employees | Unlimited (fully exempt) | Section 10(10)(i) |
| Covered private employees | ₹20,00,000 (2023 revision) | Least of: actual, formula amount, ₹20L |
| Non-covered private employees | ₹20,00,000 | Formula-based calculation applies |
Minimum Qualifying Service
Under the Payment of Gratuity Act, an employee must complete 5 years of continuous service to be eligible for gratuity. However, the Supreme Court of India has clarified that completing 4 years and 240 days in the fifth year satisfies the 5-year requirement. The 240 days rule is derived from the definition of "continuous service" under Section 2A of the Act.
There is no minimum service requirement in cases of death or permanent disability — gratuity is payable from the first day of employment in such situations.
Gratuity Provision in CTC
Many employers include gratuity as a component within the employee's Cost to Company (CTC). The standard provisioning rate is approximately 4.81% of Basic + DA per year. This is derived from the gratuity formula: (15/26) × (1/12) ≈ 4.81%. So if your monthly Basic + DA is ₹50,000, the employer provisions roughly ₹2,405 per month or ₹28,860 per year toward your future gratuity entitlement.