Gratuity payable at each salary level and year of service, using the standard (Basic + DA) × 15 × years ÷ 26 formula for employees covered by the Payment of Gratuity Act 1972 (employers with 10+ employees). All figures below the ₹20 lakh tax-free cap are fully exempt under Income Tax Section 10(10).
For example, an employee with ₹50,000 last-drawn Basic + DA and 15 years of service receives ₹4.33 L in gratuity — fully tax-free.
| Last Basic + DA | 5 years | 10 years | 15 years | 20 years | 25 years | 30 years |
|---|---|---|---|---|---|---|
| ₹20,000 | ₹57,692 | ₹1.15 L | ₹1.73 L | ₹2.31 L | ₹2.88 L | ₹3.46 L |
| ₹30,000 | ₹86,538 | ₹1.73 L | ₹2.60 L | ₹3.46 L | ₹4.33 L | ₹5.19 L |
| ₹50,000 | ₹1.44 L | ₹2.88 L | ₹4.33 L | ₹5.77 L | ₹7.21 L | ₹8.65 L |
| ₹75,000 | ₹2.16 L | ₹4.33 L | ₹6.49 L | ₹8.65 L | ₹10.82 L | ₹12.98 L |
| ₹1,00,000 | ₹2.88 L | ₹5.77 L | ₹8.65 L | ₹11.54 L | ₹14.42 L | ₹17.31 L |
| ₹1,50,000 | ₹4.33 L | ₹8.65 L | ₹12.98 L | ₹17.31 L | ₹21.63 L* | ₹25.96 L* |
| ₹2,00,000 | ₹5.77 L | ₹11.54 L | ₹17.31 L | ₹23.08 L* | ₹28.85 L* | ₹34.62 L* |
Figures rounded to the nearest rupee. * Amounts above ₹20 lakh exceed the cumulative lifetime tax-free cap under Income Tax Section 10(10); the excess is taxed at slab rates. The 5-year minimum service requirement applies (waived for death or disability). Employees of establishments NOT covered by the Act receive (Basic+DA) × 15 × years ÷ 30 instead of ÷ 26 — about 13% lower. Government employees receive a different formula with full tax exemption.
Calculate your gratuity under the Payment of Gratuity Act 1972 — with the ₹20 lakh tax-free cap and the 5-year eligibility rule.
Only Basic + DA — NOT CTC, HRA, bonus, or allowances.
≥6 → rounds up (covered only)
Covered: divide by 26 + months ≥6 rounds up. Not covered: divide by 30 + only full years.
Gratuity Payable
Tax-free portion (Section 10(10))
Capped at ₹20 lakh lifetime cumulative across all employers.
Taxable portion (above ₹20L)
Taxed at slab rates as "income from salary" in the year of receipt.
Formula at a glance
Covered: (Basic + DA) × 15 × years ÷ 26. Uncovered: (Basic + DA) × 15 × years ÷ 30. The Act covers employers with 10 or more employees in factories, shops, ports, plantations, mines, oilfields, and railway companies. Tax exemption capped at ₹20 lakh under Income Tax Section 10(10).
Gratuity is one of several end-of-employment payouts (also EPF, leave encashment, NPS lumpsum). Richify AI tracks them as one retirement corpus and models the tax implications.
Download Richify — It's FreeUnder the Payment of Gratuity Act 1972 (employers with 10+ employees): Gratuity = (Last drawn Basic + DA) × 15 × completed years of service ÷ 26. The denominator 26 represents the average working days in a month. Example: last basic + DA of ₹60,000/month and 15 years of service: 60,000 × 15 × 15 ÷ 26 = ₹5,19,231. For employees NOT covered by the Act (small employers), the denominator is 30 instead of 26, giving a slightly lower amount.
Employees of any establishment with 10 or more employees are entitled to gratuity under the Payment of Gratuity Act 1972 after completing 5 years of continuous service. The 5-year rule is waived in case of death or disability. Working journalists, factory workers, shop & establishment employees, port workers, plantation workers, and mine workers are all covered. Service must be 'continuous' as defined under Section 2A — interruptions for sickness, accident, leave, lockout, or strike not caused by the employee don't break continuity.
Mostly yes, with two exceptions. (1) Death or disability: gratuity is paid regardless of service length — to the nominee or heirs. (2) The Madras High Court (Mettur Beardsell Ltd ruling, upheld by other HCs) held that 4 years and 240 days qualifies for gratuity, treating the last partial year as completed. However, employers commonly enforce strict 5 years per the statutory text. If denied between 4 yrs 240 days and 5 yrs, the employee can file a claim under Section 7 with the Controlling Authority.
₹20 lakh — cumulative lifetime cap across all employers, set by the Payment of Gratuity (Amendment) Act 2018. The Income Tax Act Section 10(10) exempts the least of: (a) actual gratuity received, (b) ₹20 lakh, (c) the formula amount (15/26 × Basic+DA × years for covered employees, or half-month average salary × years for non-covered). Gratuity above ₹20 lakh in private employment is taxed at slab rates. Central / State Government employees and members of the armed forces are fully exempt regardless of amount.
For covered employees: if service in the last year is 6 months or more, it counts as a full year — rounded UP. If less than 6 months, rounded DOWN. So 10 years 7 months = 11 years for the formula; 10 years 5 months = 10 years. For non-covered employees: only fully completed years count — no rounding. So 10 years 11 months still counts as 10 years. This rounding rule matters: at ₹60,000 Basic+DA, the difference between 10 and 11 years is ₹34,615.
Gratuity is payable on (1) superannuation / retirement, (2) resignation after 5+ years of continuous service, (3) death (no service requirement — paid to nominee), (4) disablement due to accident or disease. The employer must pay within 30 days of it becoming due (Section 7) — failing which, simple interest at 10% p.a. accrues. If you resign after 5+ years and the employer delays or refuses, file a claim with the Controlling Authority under Section 7 of the Act.
Only on Basic Salary + Dearness Allowance (DA). NOT on CTC, HRA, bonuses, overtime, leave encashment, commissions, or any other allowances. This is a common misunderstanding — employees see their CTC and assume a 15/26 multiplier on the full CTC, which is wrong. The 'salary' for gratuity = Last drawn (Basic + DA). For private employees where DA is uncommon, gratuity is effectively 15/26 × Basic × years. This is why a higher Basic-to-allowances ratio leads to a larger gratuity.
Under the Payment of Gratuity Act formula: 50,000 × 15 × 5 ÷ 26 = ₹1,44,231. This is fully tax-exempt because it's below the ₹20 lakh cap. For 10 years at ₹50,000: ₹2,88,462. For 20 years: ₹5,76,923. The formula scales linearly with both Basic and years, so doubling either doubles the gratuity. Use the calculator above to model your own basic, DA, and years.
At a Basic + DA of ₹30,000: ₹1,73,077. At ₹50,000: ₹2,88,462. At ₹75,000: ₹4,32,692. At ₹1 lakh: ₹5,76,923. At ₹1.5 lakh: ₹8,65,385. Formula: Basic+DA × 15 × 10 ÷ 26 = Basic+DA × 5.77. Use the reckoner table below for more salary bands and tenures.