Gratuity Calculator
Calculate your gratuity payout using the Payment of Gratuity Act formula with tax exemption breakdown.
$50,000
5 yrs 0 months
Covered Under Gratuity Act?
Employee Category
Gratuity Amount
$144,231
Tax-Free Amount
$144,231
Net Gratuity
$144,231
Service (Rounded)
5 years
About Gratuity Calculator — India
Calculate gratuity using the Payment of Gratuity Act formula with full tax exemption analysis.
Payment of Gratuity Act, 1972
The Payment of Gratuity Act, 1972 mandates gratuity payment to employees who have completed at least 5 years of continuous service. The gratuity amount is calculated based on the last drawn Basic + DA salary and years of service.
The key distinction: employees covered under the Act use 26 working days/month as the divisor; those not covered use 30 calendar days.
Tax Treatment of Gratuity
Under Section 10(10) of the Income Tax Act:
- Government Employees: Fully exempt from tax — no limit.
- Private Employees (Act-covered): Exempt up to ₹20 Lakhs (Budget 2023 revision).
- Gratuity above ₹20L: Taxable at the applicable slab rate with TDS deducted.
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What is the formula for gratuity calculation?
For employees covered under the Payment of Gratuity Act: Gratuity = (Basic + DA) × 15 / 26 × Years of Service. The divisor 26 represents working days in a month. For employees not covered under the Act, the formula uses 30 as the divisor instead of 26. For example, with a Basic+DA of ₹50,000/month and 10 years of service (Act-covered): Gratuity = 50,000 × 15 / 26 × 10 = ₹2,88,462.
What is the tax-free gratuity limit?
As per the Income Tax Act Section 10(10), gratuity up to ₹20,00,000 is tax-free for employees covered under the Payment of Gratuity Act. Government employees receive full exemption regardless of amount.
Is 5 years of service mandatory for gratuity?
Yes, an employee must complete a minimum of 5 years of continuous service to be eligible for gratuity. An exception applies in cases of death or disability.