Find out how much gratuity you are entitled to under the Payment of Gratuity Act, 1972. Works for government and private sector employees. See tax-exempt and taxable portions instantly.
Last updated: 20 March 2026
Enter your salary and years of service to calculate gratuity
Gratuity is a lump-sum monetary benefit paid by an employer to an employee as a token of appreciation for the services rendered during the period of employment. It is governed by the Payment of Gratuity Act, 1972 and is one of the key retirement benefits in India, alongside Provident Fund and pension. Gratuity is payable when an employee completes at least 5 years of continuous service and leaves the organization due to resignation, retirement, superannuation, or termination.
The Act applies to every factory, mine, oilfield, plantation, port, and railway company, as well as every shop or establishment with 10 or more employees on any day in the preceding 12 months. Once an establishment is covered, it continues to be covered even if employee count drops below 10. Key points:
The formula depends on your employment type:
| Employee Type | Formula | Divisor |
|---|---|---|
| Private (Covered under Act) | (Basic + DA) × 15 × Years ÷ 26 | 26 working days |
| Government | (Basic + DA) × 15 × Years ÷ 30 | 30 calendar days |
| Private (Not under Act) | (Basic + DA) × 15 × Years ÷ 30 | 30 (at employer discretion) |
For a private employee covered under the Gratuity Act with a last drawn Basic + DA of ₹50,000 per month and 10 years of service:
Since ₹2,88,462 is well below the ₹20 lakh tax-exempt ceiling, the entire amount is tax-free.
The number 15 represents 15 days of wages for each completed year of service — this is what the Act mandates as the minimum gratuity payable. The divisor 26 represents the number of working days in a month (30 calendar days minus 4 Sundays). For government employees, the divisor is 30 (calendar days) because their salary structure already accounts for all 30 days. This difference means private employees actually receive a slightly higher gratuity per year compared to government employees at the same salary level.
The most important eligibility criterion is 5 years of continuous service with the same employer. Key details:
Gratuity taxation depends on whether you are a government employee or a private-sector employee:
Most Indian companies include gratuity as a component of CTC. The monthly provision is calculated as 4.81% of Basic Salary (derived from 15/26 × 1/12 = 4.81%). For an employee with ₹40,000 Basic, the monthly gratuity provision is ₹1,923, or ₹23,077 annually. This amount is set aside by the employer but only paid out when the employee becomes eligible (typically after 5 years). Understanding this helps you calculate your actual in-hand salary from CTC.
For a complete understanding of your salary structure, also check our PF Calculator, Professional Tax in Delhi guide, and explore our automated payroll software that handles gratuity provisioning, PF, ESI, and TDS calculations for your entire team.
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