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Gratuity Calculator
Your payout under the Payment of Gratuity Act, with the tax-exempt portion. Accurate, instant and free — for India.
What these mean:
Gratuity of ₹3,00,000 for 8 completed years. Tax-exempt ₹3,00,000; taxable ₹0.
Where it goes
- Tax-exempt · 100%₹3,00,000
How gratuity is calculated
Indian gratuity is governed by the Payment of Gratuity Act, 1972 (for covered establishments) and CCS Pension Rules (for government employees). The formula branches on establishment type; tax treatment branches further on sector under Section 10(10) of the Income Tax Act.
Covered establishments
≥10 employees — Payment of Gratuity Act, 1972
e.g. ₹65,000 × 15 × 8 ÷ 26 = ₹3,00,000
The divisor 26 represents working days per month (a calendar month treated as 26 days, excluding 4 Sundays). A partial final year of more than 6 months rounds up to a full year; 6 months or fewer is discarded. Statutory cap: ₹20,00,000 for private-sector employees.
Non-covered establishments
<10 employees — contractual, conventional formula
divisor 30 (calendar days) vs 26 (working days) → lower payout
The divisor 30 uses calendar days. There is no statutory amount cap for non-covered employers, but the income-tax exemption ceiling of ₹20,00,000 still applies under Section 10(10)(iii).
Government employees
CCS Pension Rules — ₹25,00,000 cap (eff. 1 Jan 2024)
fully exempt from income tax under §10(10)(i); cap raised from ₹20L (DA crossed 50%, 7th CPC mechanism)
“Emoluments” = basic pay + DA + NPA (where applicable) at the time of retirement/death. Gratuity received by government employees is fully exempt from income tax; no least-of-three test applies.
Tax exemption — Section 10(10)
Least-of-three rule — private sector (covered & non-covered)
covered: formula = 15/26 × last drawn × years; non-covered: formula = ½ × 10-month avg × years
The formula component differs by employee type: covered employees use the 15/26 last-drawn form; non-covered employees use the half-month × 10-month average form. The ₹20,00,000 ceiling and the “least of three” test apply to both. Any amount above the exempt threshold is taxable as salary income.
A complete gratuity calculation
Employee: private-sector, covered establishment (≥10 employees). Last drawn basic ₹60,000 + DA ₹5,000 = ₹65,000. Continuous service: 8 years 3 months(partial year ≤ 6 months → discarded; completed years = 8).
- 1Gratuity formula (covered, ÷26): ₹65,000 × 15 × 8 ÷ 26 = ₹3,00,000.
- 2Cap check: ₹3,00,000 < ₹20,00,000 statutory cap → full amount payable; no excess.
- 3Tax — Section 10(10)(ii) least-of-three: (a) formula = 15/26 × 65,000 × 8 = ₹3,00,000; (b) ceiling = ₹20,00,000; (c) actual = ₹3,00,000. Least = ₹3,00,000 → fully exempt; taxable = ₹0.
- 4Partial-year rounding: 3 months ≤ 6 months → discarded. If service had been 8 years 7 months, the partial year would round up to 9 completed years.
Frequently asked questions
For covered establishments (10 or more employees), the formula is: Gratuity = (Basic + DA) × 15 × Years ÷ 26. For non-covered establishments (fewer than 10 employees), the divisor is 30 instead of 26. A partial final year of more than 6 months is rounded up to a full year; 6 months or fewer is discarded. Government employees use the same 15/26 structure but under CCS Pension Rules with a ₹25,00,000 cap.
An employee must complete 5 years of continuous service with the same employer. The 4-years-240-days rule can qualify: if the employee worked at least 240 days in the 5th year, that year counts as completed, so "4 years 240 days" effectively meets the threshold. The 5-year minimum is waived entirely in the case of death or permanent disability — the employee (or nominee) receives full gratuity regardless of tenure.
Under Section 10(10) of the Income Tax Act, government employees are fully exempt from tax on gratuity. Private-sector employees (both covered and non-covered) are exempt up to the least of three amounts: (i) the statutory formula amount, (ii) ₹20,00,000 (the CBDT ceiling per Notification S.O. 1213(E)), and (iii) the actual gratuity received. Any amount above the least-of-three is taxable as salary income.
For private-sector employees, the statutory cap is ₹20,00,000 (raised from ₹10,00,000 in 2010, per CBDT Notification S.O. 1213(E) effective 29 March 2018). For central government employees and those under CCS Pension Rules, the cap is ₹25,00,000, effective 1 January 2024 (DoPPW circular dated 30 May 2024, triggered by DA crossing 50% under the 7th Pay Commission mechanism). The two caps must never be mixed.
A covered establishment has 10 or more employees and is governed by the Payment of Gratuity Act, 1972. The gratuity formula uses a divisor of 26 (working days per month). A non-covered establishment has fewer than 10 employees; gratuity is contractual, not statutory, and the conventional formula uses a divisor of 30 (calendar days). There is no statutory amount cap for non-covered employers, but the income-tax exemption ceiling of ₹20,00,000 still applies.
Generally no. The 5-year continuous-service requirement (or the 4-years-240-days equivalent) must be met. The only exceptions are death or permanent disability — in those cases the full gratuity entitlement is payable from day one, and the 5-year minimum is waived. Resignation, termination for reasons other than misconduct, or retirement before 5 years results in no statutory gratuity.
Method, assumptions & references
Methodology note: India covered-establishment formula (÷26) and non-covered formula (÷30) per Payment of Gratuity Act, 1972, Section 4. Government-employee cap raised to ₹25,00,000 effective 1 January 2024 (DoPPW circular, 30 May 2024). Tax-exemption ceiling ₹20,00,000 per CBDT Notification S.O. 1213(E), 8 March 2019, under Section 10(10)(ii)/(iii). The least-of-three formula component differs by employee type (covered: 15/26 last-drawn; non-covered: ½ × 10-month average). Results are estimates; consult a chartered accountant or HR professional for your specific situation.
Results are estimates based on your inputs
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