What this is doing
Indian private-sector gratuity is not “one month per year.” Covered shops (usually 10 or more employees) sit under the Payment of Gratuity Act, 1972. The cheque is 15 days’ wages per year, and a working month is treated as 26 days — 365 minus 52 Sundays, divided by 12.
Covered: (Basic + DA) × 15 × years / 26
Years here are completed years, plus one if the leftover is six months or more. 7 years 8 months becomes 8. 7 years 5 months stays 7.
If the Act does not apply, most offer letters still promise gratuity. The usual contract formula is 15/30 on completed years only — half a month per finished year, no rounding. Government service is a third bucket: the payout follows service rules, and the whole receipt is exempt under Section 10(10)(i). Type the amount on the PPO or relieving letter.
The tax split
Section 10(10) is not “₹20 lakh free, always.” For a covered private employee it is the least of three numbers: what you actually received, ₹20 lakh minus any gratuity already exempted in your life, and the same 15/26 figure the Act uses. Pay above the formula and the extra is taxable even if you are under ₹20 lakh.
Uncovered employees use the same three-limit test, with 15/30 as the formula cap (half-month × completed years). The ₹20 lakh notification (2018) is aggregate — every employer, every exit. Enter prior exempted amounts or this page will overstate the exemption.
New vs Old regime does not change 10(10). It only changes the slab on the taxable remainder. Run that remainder through the
income tax calculator
if you need the cess-inclusive hit.
Worked example — the default inputs
Covered employee. Last drawn Basic+DA ₹50,000. Service 7 years 8 months. No earlier claim. Nothing typed in “amount received.”
- 8 months ≥ 6 → qualifying years = 8
- ₹50,000 × 15 × 8 / 26 = ₹2,30,769
- Least of ₹2,30,769 / ₹20,00,000 / ₹2,30,769 = ₹2,30,769 exempt
- Taxable ₹0. Lifetime cap left ₹17,69,231
Flip the category to “Not covered” on the same tenure: completed years stay 7, payout drops to ₹1,75,000.
Who should use which toggle
Covered: factory, shop, or establishment that has had 10 or more employees on any day in the last 12 months — or a smaller shop that still opted into the Act. Read the appointment letter; “as per the Payment of Gratuity Act” is the giveaway.
Not covered: most tiny firms, some partnerships, and any contract that writes 15/30 in so many words. If HR pays more than the formula as a retention sweetener, type that number in “amount received.” The extra sits in the taxable column.
The 4.81% line on a CTC annexure is not this calculator. That percentage is how payroll books a monthly provision (15÷26÷12). Leaving after 5 years 1 month does not pay you 4.81% × 61 months. It pays last drawn × 15/26 × 5 (or 6 if the leftover months cross six).
Questions people actually ask
How is gratuity calculated if my company is covered by the Act?
Last drawn Basic + DA, times 15, times qualifying years, divided by 26. A part-year of 6 months or more counts as a full year. Example: ₹50,000 Basic+DA and 7 years 8 months → 8 years → ₹2,30,769.
What if my employer is not covered by the Gratuity Act?
Private establishments below the 10-employee threshold usually use 15/30 on completed years only — no 6-month rounding. Same ₹50,000 and 7 years 8 months → 7 years → ₹1,75,000.
Is gratuity tax-free?
Only up to Section 10(10). For non-government employees that is the least of: amount received, ₹20 lakh minus any gratuity already exempted in your life, and the statutory 15-day formula. The rest is taxed as salary. Government gratuity is fully exempt.
Do I get gratuity if I resign before 5 years?
The Act requires five years of continuous service, except on death or disablement. Some people treat 4 years 6 months as five years. This calculator does not. It shows the formula amount and flags that the statutory gate is not met.
Is the 4.81% gratuity line on my CTC the same as this payout?
No. 4.81% of monthly Basic is an accounting accrual (15/26 ÷ 12). The exit cheque uses last drawn Basic+DA and your actual years. They match only by coincidence.
Does the New tax regime change gratuity tax?
No. Section 10(10) sits in Chapter III. It applies in both regimes. What changes is the slab that hits the taxable remainder.
I already took gratuity from a previous employer. What happens?
The ₹20 lakh ceiling is lifetime, across employers. Enter what was already exempted. This tool subtracts it before computing the new exemption.
Which salary figure do I type — CTC or Basic?
Last drawn monthly Basic + dearness allowance only. Not HRA, not special allowance, not CTC. If DA is not in your terms, type Basic alone.
Estimate only
Forfeiture for misconduct, overlapping employers, and state shops-and-establishments overlays are out of scope. Confirm the category and the cheque with payroll and a CA before you sign a full-and-final.