7 years 7 months, covered employer
Last basic plus DA is ₹60,000 a month. The 7 months count as a full year, so service is 8 years. Gratuity = 15 ÷ 26 × ₹60,000 × 8 = ₹2,76,923, all of it tax-free.
Gratuity calculator
60 thousand
Covered by the Gratuity Act?
Gratuity
₹3,80,769
11 years counted.
- Tax-free limit
- ₹20,00,000
- Taxable part
- ₹0.00
Gratuity rules in 2026
Gratuity is a lump sum your employer pays when you leave after long service. The Payment of Gratuity Act, 1972, which gave the 15/26 formula, was folded into the Code on Social Security, 2020, and the Code has applied since 21 November 2025. The formula is the same: 15 days' wages for every completed year of service, plus any part year longer than six months. Wages are divided by 26 working days a month.
The Code made two changes that matter here. First, fixed-term employees hired directly by the employer now qualify after one year of continuous service, paid in proportion to their service. Permanent staff still need five years, except on death or disablement. Second, wages are defined more broadly: if allowances are more than half of total pay, the excess counts as wages. That can raise the 'basic plus DA' figure you should type in.
Under section 19 of the Income-tax Act, 2025, government employees pay no tax on gratuity. Others are exempt up to the least of the gratuity paid, the formula amount and the ₹20 lakh ceiling. The exemption applies in both regimes. Anything above that is taxed as salary, and the income tax calculator shows the effect. To plan what to do with the lump sum, see the retirement calculator, the FD calculator or PPF.
Sources
What this calculator does not account for
- Employer policies that pay more than the legal minimum.
- Tax rules for your exact situation beyond the standard exemption.
How this is calculated
Formula: 15 days per year of service
gratuity =15 ÷ 26 × monthly salary × yearsWhat the symbols mean
- 26Working days in a month under the Act. Employers outside the Act use 30 and only completed years.
- yearsUnder the Act, a part year of more than six months counts as a full year.
Good to know
- You need at least 5 years of continuous service, except on death or disablement.
- For private employees, up to ₹20 lakh is tax-free.
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Worked examples
Each example is worked out by the same code as the calculator above.
The same person, employer not covered
Employers outside the Act use half a month's salary for each completed year only: 15 ÷ 30 × ₹60,000 × 7 = ₹2,10,000.
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<iframe src="/embed/gratuity" title="Gratuity" width="100%" height="720" style="border:0;max-width:42rem" loading="lazy"></iframe>Questions
Do 4 years and 8 months qualify?
Five years of continuous service is the usual minimum, and courts have counted 4 years and 240 days as five years in some cases. Check with your employer.
Is gratuity taxable?
For private-sector employees, up to ₹20 lakh in a lifetime is exempt. Government employees are fully exempt.
Why 26 and not 30?
The Act counts 26 working days in a month, which gives a slightly larger payout than dividing by 30.
Do fixed-term employees get gratuity after one year?
Yes. Since 21 November 2025, fixed-term employees hired directly by the employer qualify after one year of continuous service, paid in proportion to their service.
Is gratuity tax-free in the new regime?
Yes. The exemption up to ₹20 lakh for private-sector employees applies whichever regime you choose.
When must the employer pay gratuity?
Within 30 days of it becoming payable. Late payment carries simple interest.