Free statutory tool

How much gratuity are you actually owed?

Enter your last drawn Basic + DA and tenure to see the exact payout under the Payment of Gratuity Act 1972 — with Section 10(10) tax exemption and the ₹20 lakh ceiling applied.

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✓ Free tool ✓ No data stored ✓ Section 10(10) exemption
Gratuity Payout
10 years · ₹50,000 Basic+DA
Section 10(10)
Formula amount ₹2,88,462
Tax-exempt ₹2,88,462
Taxable ₹0
Net in hand ₹2,88,462

HOW IT WORKS

Three steps to your gratuity payout

1

Enter your salary & tenure

Last drawn Basic + DA and your years and months of continuous service.

2

We apply the Act & tax law

Section 4 formula, the ₹20 lakh ceiling, and Section 10(10) exemption — all computed instantly.

3

See exempt vs taxable

Formula amount, tax-exempt portion, taxable excess, TDS estimate, and net in-hand.

Calculate your gratuity

Enter your last drawn Basic + DA and tenure to see the breakdown.

₹
Use Basic + DA only. HRA, allowances, and bonuses are excluded under the Act.
years
months
Counted as 10 years (under 6 months drops).
Establishment with 10+ employees. Divisor = 26 working days.
Only applies to gratuity above the ₹20 lakh tax-exempt ceiling.

Gratuity Breakdown

Formula
Last drawn (Basic+DA)₹50,000
Counted years10
Divisor26 working days
Formula amount₹2,88,462
Tax treatment (Section 10(10))
Tax-exempt portion₹2,88,462
Taxable portion₹0
Gratuity Payable₹2,88,462
Net in hand (after TDS)₹2,88,462
Worth knowing
The Madras High Court ruled that 4 years and 240 days of continuous service is treated as 5 years. We use the conservative 5-year cutoff by default. If you have between 4 years 240 days and 5 years and your employer disputes the gratuity, the case law is on your side. See the formula explainer for the citation.

The gratuity formula, step by step

Gratuity = (Last drawn Basic + DA) × 15 × Years of service ÷ 26
Worked example. An employee with last drawn Basic + DA of ₹50,000 and 10 completed years of service:
(₹50,000 × 15 × 10) ÷ 26 = ₹2,88,462
Since ₹2,88,462 is well below the ₹20 lakh tax-exempt ceiling under Section 10(10) of the Income Tax Act, the entire amount is exempt and the employee receives the full payout tax-free.

What the Act and tax law actually say

5 years of service

Continuous service with the same employer. Waived only for death or disablement. Madras HC reads 4 yrs 240 days as 5 years.

Basic + DA only

"Last drawn salary" excludes HRA, special allowance, bonus, and overtime. Using gross or CTC overstates the entitlement.

15 / 26 ratio

15 days' wages per completed year, divided by 26 working days in a month. Non-covered employees use 30 instead of 26.

₹20 lakh ceiling

Statutory cap under Section 4(3) of the Act, raised in 2018 by Notification S.O. 1420(E). Lifetime limit across all employers.

Section 10(10) exemption

Lowest of: actual gratuity, ₹20 lakh, formula amount. Excess is taxable as salary income at slab rate.

Service rounding

6 months or more in the final year rounds up. Less than 6 months drops. 7 yrs 8 mo = 8 years; 7 yrs 4 mo = 7 years.

Common questions

How is gratuity calculated in India?+
For employees covered under the Payment of Gratuity Act 1972, gratuity = (Last drawn Basic + DA) x 15 x Years of completed service / 26. The 15 represents 15 days' wages per year, and 26 represents the working days in a month (30 minus 4 weekly off-days). For employees not covered by the Act, the divisor is 30 instead of 26.
What is the minimum service required for gratuity?+
5 years of continuous service with the same employer is the statutory minimum. The only exceptions are death or permanent disablement, where gratuity is payable from day one regardless of tenure. The Madras High Court has ruled that 4 years and 240 days is treated as 5 years, but employers may still dispute this — the conservative 5-year rule is the default in this calculator.
Is gratuity tax-free in India?+
Under Section 10(10) of the Income Tax Act, gratuity is exempt from tax up to the lowest of three amounts: actual gratuity received, ₹20 lakh (lifetime cap raised by the Payment of Gratuity (Amendment) Act 2018), or the formula-computed amount. Government employees enjoy a fully tax-exempt gratuity under Section 10(10)(i) without any cap.
What is the maximum gratuity payable?+
The Payment of Gratuity (Amendment) Act 2018 raised the statutory ceiling to ₹20,00,000 (₹20 lakh), effective 29 March 2018 via Government Notification S.O. 1420(E). Employers can choose to pay more, but any amount above ₹20 lakh is taxable as salary income and the lifetime cap applies across all employers in your career.
How are partial years of service counted?+
Service of 6 months or more in the final year is rounded up to the next full year. Less than 6 months is dropped. Example: 7 years 8 months = 8 years for gratuity; 7 years 4 months = 7 years.
What counts as "last drawn salary" for gratuity?+
Only basic salary plus dearness allowance (DA) at the time of cessation. HRA, special allowance, performance bonus, overtime, and other components are excluded. Using gross salary or CTC instead of basic+DA overstates the entitlement.

Dig deeper

Glossary
Gratuity
Eligibility, last drawn salary definition, and worked examples.
Glossary
Gratuity Calculation Formula
Section 4(2), the 15/26 derivation, and the ₹20 lakh ceiling history.
Blog
Gratuity Law in India
The full legal walkthrough for HR teams and foreign employers.
Tool
CTC Calculator
See the 4.81% gratuity provision against any CTC.

Hand off gratuity provisioning to Omnivoo

We accrue gratuity monthly, recompute on last drawn salary at exit, apply Section 10(10), and pay within the statutory 30-day deadline. No spreadsheets, no missed deadlines, no Section 8 interest.

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