Gratuity Calculator India 2026
Free Gratuity Calculator with 4 modes: Gratuity Calculator using the statutory 15/26 formula under the Payment of Gratuity Act, 1972 (covered ÷26 vs not-covered ÷30, year rounding for months > 6, Basic+DA base), Tax Exemption Calculator with Section 10(10) rules for all 3 employee types (Government — 100% exempt, Private Covered — least of actual/₹20 lakh/formula, Private Not Covered — half-month average), Employer Liability Estimator with AS-15/Ind AS-19 annual provisioning and monthly cashflow planning, and Eligibility Guide covering 5-year continuous service rule, 240-day/190-day judicial interpretation, death & disability waiver, forfeiture under Section 4(6), and nomination via Form F.
What is Gratuity?
Gratuity is a statutory terminal benefit paid by an employer to an employee as a token of appreciation for their long-term service. Governed under the Payment of Gratuity Act, 1972, it provides financial security to employees upon retirement, resignation, superannuation, death, or disablement.
The Act applies to every factory (regardless of employee count) and every other establishment employing 10 or more persons on any day during the preceding 12 months. Once applicable, the Act continues to apply even if the employee count drops below 10.
Eligibility Criteria
| Criterion | Requirement |
|---|---|
| Continuous Service | Minimum 5 years with the same employer |
| 240-Day Rule (6-day week) | If 240+ days worked in 5th year → deemed 5 years complete |
| 190-Day Rule (5-day week) | If 190+ days worked in 5th year → deemed 5 years complete |
| Death | 5-year rule waived — payable to nominee/legal heir |
| Disability | 5-year rule waived — payable even with < 5 years service |
| Employee Types | All types — manual, clerical, supervisory (no salary ceiling) |
Gratuity Calculation Formula
| Category | Formula | Example (₹50K, 10 years) |
|---|---|---|
| Covered under Act (÷26) | (Last Salary × 15 × Years) ÷ 26 | (₹50,000 × 15 × 10) ÷ 26 = ₹2,88,462 |
| Not Covered (÷30) | (Last Salary × 15 × Years) ÷ 30 | (₹50,000 × 15 × 10) ÷ 30 = ₹2,50,000 |
Year Rounding Rule
| Actual Service | Rounded To | Impact on ₹50K salary |
|---|---|---|
| 7 years 4 months | 7 years | ₹2,01,923 |
| 7 years 7 months | 8 years | ₹2,30,769 (+₹28,846) |
| 14 years 6 months | 14 years | ₹4,03,846 |
| 14 years 7 months | 15 years | ₹4,32,692 (+₹28,846) |
Tax Exemption — Section 10(10)
| Employee Type | Exemption Rule | Limit |
|---|---|---|
| Government | 100% exempt — no conditions | No limit |
| Private (Covered) | LEAST of: Actual, ₹20L, Formula (15/26) | ₹20 lakh (lifetime) |
| Private (Not Covered) | LEAST of: Actual, ₹20L, Half-month avg salary × years | ₹20 lakh (lifetime) |
The ₹20 lakh limit is a lifetime limit — if you receive gratuity from multiple employers, the total exemption across your career cannot exceed ₹20 lakh. Use our Income Tax Calculator to see the impact on your total tax.
Forfeiture of Gratuity — Section 4(6)
| Ground | Extent of Forfeiture | Condition |
|---|---|---|
| Damage/Loss to Employer | To the extent of loss caused | Willful omission or negligence |
| Misconduct | Full or partial | Riotous/disorderly conduct, violence, moral turpitude |
Mandatory due process: The employer must issue a show-cause notice and give the employee an opportunity to be heard before forfeiting gratuity.
Death Gratuity — Enhanced Rates
| Service Period | Gratuity Payable |
|---|---|
| Less than 1 year | 2 × last drawn salary |
| 1 to 5 years | 6 × last drawn salary |
| 5 to 11 years | 12 × last drawn salary |
| 11 to 20 years | 20 × last drawn salary |
| 20+ years | Half-month salary per completed 6 months (max 33×) |
Death gratuity is payable to the nominee (designated via Form F) or legal heirs if no nomination exists.
Employer Obligations
- Payment deadline: Within 30 days of gratuity becoming payable
- Interest on delay: Simple interest at 10% per annum beyond 30 days
- Provisioning: AS-15 / Ind AS-19 compliant actuarial valuation required annually
- Insurance: Can arrange through group gratuity insurance (LIC or other insurers)
- Self-funding: Alternatively, create a gratuity fund with approved trust
- Nomination: Collect Form F from all employees; update on marriage/change
- Penalty: Non-compliance — imprisonment up to 1 year, fine up to ₹10,000, or both
Use our Employer Liability Estimator (Mode 3) to compute your workforce-level gratuity provision. See Business Loan Calculator for working capital planning.
Gratuity as Part of CTC
| Aspect | Detail |
|---|---|
| CTC Component | 4.81% of Basic + DA (= 15/26 × 1/12) |
| Monthly Provision | ₹2,405 for ₹50,000 Basic+DA |
| Vesting | Only after 5 years of continuous service |
| Early Exit | If < 5 years, employer retains the provision |
See our Salary Calculator for complete CTC-to-take-home breakdown.
Gratuity vs Other Retirement Benefits
| Benefit | Governed By | Employer / Employee | Tax Treatment |
|---|---|---|---|
| Gratuity | Payment of Gratuity Act, 1972 | 100% employer-funded | Exempt up to ₹20L (Sec 10(10)) |
| EPF | EPF Act, 1952 | 12% + 12% (shared) | Exempt if > 5 years (Sec 10(12)) |
| EPS-95 Pension | EPS, 1995 | From employer's 12% | Pension taxable as salary |
| NPS | PFRDA Act, 2013 | 10% + 14%/10% | 60% exempt at exit (Sec 10(12A)) |
| Superannuation | Company policy | Employer-funded | Exempt up to ₹15L |
Use our Retirement Corpus Calculator and NPS Calculator for a complete retirement planning stack.
Gratuity for Fixed-Term Contract Employees
Following the 2018 amendment (labour code reforms), fixed-term contract employees are eligible for gratuity on a pro-rata basis even if their contract is less than 5 years. This is a significant change from the original 5-year requirement and applies to all establishments covered under the Act.
Related Calculators & Tools
- Salary Calculator — Gratuity is a CTC component. See complete net salary breakdown.
- Income Tax Calculator — Gratuity above ₹20L is taxable.
- Retirement Calculator — Include gratuity in your corpus projection.
- Bonus Calculator — Another statutory terminal benefit under Payment of Bonus Act.
- NPS Calculator — Combine gratuity + NPS for tax-efficient retirement.
- TDS Calculator — TDS obligations on gratuity above exemption.