Gratuity is a statutory exit benefit governed by the Payment of Gratuity Act, 1972 - paid to employees who complete five or more years of continuous service. The standard formula gives you 15 days of last-drawn basic + DA for every year served, calculated on a 26-day month. The lifetime tax-free cap, raised from ₹10 lakh to ₹20 lakh in 2019, applies cumulatively across all employers a private-sector employee has worked for.
The guides below cover the three things every salaried employee should know before resigning or retiring: how the calculation actually works (including the rounding rules that can swing your gratuity by a year's worth of pay), who qualifies and the narrow exceptions to the 5-year minimum, and how the ₹20 lakh tax exemption is computed across multiple employers. The FAQ at the bottom answers eligibility and tax queries directly.
All Gratuity Guides
Gratuity Calculation Guide India 2026 | Formula & Limit
(15/26) × basic salary × years of service. ₹20 lakh ceiling for private sector. Worked examples, rounding rules and payment tips.
Read Guide →Gratuity Eligibility India 2026 | 5-Year Rule & Exceptions
5 years continuous service required. Exceptions for death or disability. Layoff and resignation rules with 30-day payment timeline.
Read Guide →Gratuity Tax Exemption India 2026 | How Much is Tax-Free?
₹20 lakh exempt for private sector. Fully exempt for government employees. Calculation formula and worked examples explained.
Read Guide →Calculate Your Gratuity
Use our free Gratuity calculator to plan your investments with accurate projections.
Open Gratuity Calculator →Frequently Asked Questions
Who is eligible for gratuity in India?
Any employee who completes 5 years of continuous service with the same employer is eligible, as per the Payment of Gratuity Act 1972. The 5-year rule is waived in cases of death or permanent disablement. Both private-sector and government employees qualify, with different calculation and exemption rules.
How is gratuity calculated for private-sector employees?
For employers covered by the Gratuity Act (10+ employees): Gratuity = (Last drawn basic salary + DA) × Years of service × 15 / 26. For uncovered employers: (Average salary of last 10 months) × Years × 15 / 30. Service of 6 months or more in the final year is rounded up to a full year.
What is the tax exemption limit on gratuity?
Private-sector employees get a lifetime exemption of ₹20 lakh (applied cumulatively across employers). The exemption is the lower of: actual gratuity received, ₹20 lakh, or 15 days' salary per completed year of service. Any amount above the cap is taxed at slab rate. Government employees receive full tax exemption.
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