What is the maximum gratuity limit?

The maximum tax-exempt gratuity limit under the Payment of Gratuity Act is ₹20 lakh (revised in 2019). Any amount above ₹20 lakh is taxable. Government employees have different rules and their gratuity is fully exempt from tax.

Is gratuity payable on resignation?

Yes, gratuity is payable on resignation if you have completed 5 years of continuous service. It is also payable on superannuation (retirement), death, disability, or retrenchment regardless of years of service.

What counts as 'last drawn salary' for gratuity?

For Gratuity Act-covered employees: Basic salary + Dearness Allowance (DA). For non-covered employees: Basic + DA + HRA + Other allowances (total last drawn salary). This calculator lets you input either component.

💼 Employee Rights

Gratuity Calculator

Calculate your exact gratuity entitlement under the Payment of Gratuity Act 1972. Covers private sector, government, and non-covered employees.

Employment sector

Your details

Last Basic Salary + DA

₹

Basic + Dearness Allowance per month

Years of service

yrs

Enter decimals for partial years (e.g. 10.5)

Additional months in last year

≥ 6 months counts as a full extra year

Reason for separation

✅

Eligibility: Enter your details

Minimum 5 years required for most cases

💰 Your Gratuity Amount ₹0 Under Payment of Gratuity Act 1972

₹0Basic + DA / mo

0Service (counted)

ExemptTax Status

Formula: (Basic + DA) × 15 ÷ 26 × Years

Gratuity calculation breakdown

Last Basic + DA per month₹0

Qualifying years of service0 years

Formula factor15/26

Gratuity (calculated)₹0

Maximum tax-exempt limit ₹20,00,000

Final Gratuity Payable ₹0

Year-by-year gratuity accrual

🛡️

For employees covered under the Gratuity Act: Gratuity up to ₹20 lakh is fully exempt from income tax. Any amount above ₹20 lakh is taxable as salary income. For government employees, gratuity is fully exempt with no upper limit.

⚠️ This is a general estimate. Gratuity eligibility and amount may be affected by your employment contract, company policy, and court interpretations. Consult an HR specialist or labour lawyer for your specific situation.

What is Gratuity?

Gratuity is a lump-sum payment made by an employer to an employee as recognition of services rendered. Under the Payment of Gratuity Act 1972, every establishment with 10 or more employees must pay gratuity to eligible workers.

Covered employees (Act): (Basic + DA) × 15 ÷ 26 × Years
Non-covered employees: (Last salary) × 15 ÷ 30 × Years
Rounding rule: Service > 6 months in final year → rounds up to next full year
Maximum (tax exempt): ₹20,00,000 (₹20 lakh)

⏰ Minimum service

5 years of continuous service required. Exception: in case of death or disability, gratuity is payable regardless of years served. "Continuous service" includes approved leaves and lay-offs.

📅 15 vs 26 explained

15 = number of days per year used in the formula (half month's salary). 26 = working days in a month (30 - 4 Sundays). Non-covered employers use 30 days/month, giving a lower factor of 15/30 = 0.5.

🧾 Tax exemption

For private sector: exempt up to ₹20 lakh. For govt/local body employees: fully exempt with no cap. Excess over ₹20L is taxed as salary. Tax is on the lesser of actual gratuity or 15 days × years formula.

🏛️ When must it be paid

Employer must pay within 30 days of becoming payable. Delay attracts 10% simple interest per year. Employee must file Form I within 30 days of becoming eligible.

Frequently asked questions

How is gratuity calculated in India?

For employees covered under the Gratuity Act: Gratuity = (Basic + DA) × 15/26 × Years of service. Example: ₹50,000 basic+DA, 10 years: ₹50,000 × 15/26 × 10 = ₹2,88,461. The 15 represents half a month's wage and 26 is the number of working days in a month.

What is the minimum service period for gratuity?

5 years of continuous service. However, some courts have held that 4 years + 240 days qualifies as 5 years. In case of death or permanent disability, gratuity is payable regardless of service duration. Check your company's gratuity policy for specifics.

Is gratuity taxable?

For private sector employees: Gratuity up to ₹20 lakh is tax-exempt. Amount above ₹20 lakh is taxed as salary income. For government employees: Fully exempt from income tax with no upper limit. The exemption is the least of: (i) actual gratuity, (ii) ₹20 lakh, (iii) 15 days' salary × years.

Am I eligible for gratuity if I resign?

Yes, if you have completed 5 years of continuous service. Gratuity is payable on resignation, retirement, death, disability, or retrenchment. The employer cannot withhold gratuity except in cases of termination due to violent misconduct causing damage to the employer's property.

What is the maximum gratuity amount?

The maximum tax-exempt gratuity limit was revised to ₹20 lakh in 2019. There is no upper limit on the gratuity amount itself — employers can pay more if stipulated in the employment contract. The ₹20 lakh cap is only for income tax exemption purposes.