Gratuity calculator
How much gratuity will I get, and how much of it is tax-free?
15/26 × ₹50,000 × 10 years
How this is calculated
Rules checked against their sources on 29 September 2026. Tax year FY2026-27.
What gratuity is
Gratuity is a lump sum an employer pays when you leave after at least five years of continuous service, on retirement, resignation, or death or disablement (when the five-year rule is waived). The Payment of Gratuity Act 1972 covers every establishment with ten or more employees and fixes both the formula and the minimum.
The 15/26 formula
For each completed year of service you get fifteen days' wages, and a month is counted as 26 working days, so the multiplier is 15/26 of your last drawn monthly basic and dearness allowance. A part-year over six months rounds up to a full year; under six months it is dropped. Ten years and seven months at a last basic of ₹50,000 gives 15/26 × 50,000 × 11, about ₹3.17 lakh.
Only basic and DA count, not HRA or other allowances. Employers not covered by the Act often use the same formula with a 30-day month (15/30), which pays a little less; some pay more under their own scheme.
Tax
Gratuity received by central and state government employees is fully exempt. For everyone else the exemption is the least of the Act's formula, the amount actually received and ₹20 lakh, and the ₹20 lakh is a lifetime limit across employers. Anything above is taxed as salary in the year received, at your slab plus 4% cess. Leave encashment paid at retirement follows a similar rule with a ₹25 lakh limit.
Why the timing matters
Because service rounds to whole years, leaving at four years and eleven months pays nothing and leaving at five years pays five years' worth. The "one more year" figure on this page shows what another completed year adds at your current pay. Gratuity also grows with your last drawn basic, not the average, so a raise before you leave lifts the whole amount.
How this fits a retirement plan
Gratuity, leave encashment and the EPF settlement land together on the day you retire and are usually the largest cash sum you will ever receive at once. A retirement plan places that lump sum on the right date, taxes the part that is taxable, and decides how much of it should buy an income and how much should stay invested.
Questions people ask
- Am I eligible before five years?
- Not on resignation or retirement. The five-year rule is waived for death or permanent disablement, when the nominee or the employee receives gratuity for the years served. Some courts have treated four years and 240 days as five, but that is not settled and employers rarely apply it.
- Which salary counts?
- Your last drawn basic pay plus dearness allowance, per month. HRA, special allowance, bonus and overtime are excluded. If your basic is a small share of a large CTC, gratuity is smaller than people expect.
- Is gratuity part of CTC?
- Many employers show 4.81% of basic as gratuity in the CTC breakdown (15/26 divided by 12 is 4.81%). It is money set aside for you, but you receive it only after five years.
- How is the tax calculated above ₹20 lakh?
- The excess is added to your salary income for that year and taxed at your slab under whichever regime you file, plus cess. A large gratuity can push you into a higher slab; Section 89 relief may help if it relates to earlier years.
- Is there a maximum?
- The Act caps the statutory amount at ₹20 lakh, which is also the tax-free limit. An employer can pay more under its own scheme, but the amount above the cap is taxable.
Want the whole picture?
A free Eazyretire plan puts this number next to your income, savings and spending and tells you whether your money lasts to the age you plan for, and what to change if it will not.