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Gratuity Act FY 2026-27

Gratuity Calculator India

Our Gratuity Calculator India is a gratuity formula calculator designed to project your statutory gratuity payout under the Payment of Gratuity Act based on basic salary and tenure.

Gratuity
A statutory retirement benefit paid by an employer to an employee for services rendered, mandated under the Payment of Gratuity Act, 1972.
Statutory Payout Eligibility
Salaried employees who complete at least 5 years of continuous service are eligible to receive gratuity, calculated as 15/26 of last drawn basic salary per year of service.
Your employment details FY 2026-27
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Covered: standard 15/26 days formula. Not covered: 15/30 days formula.

Payment of Gratuity Act, 1972: Rules, Formulas & Tax Limits

CA
Written by CTC Calculator Editorial Team Reviewed by CA K. Sharma (Chartered Accountant) | Updated: FY 2026-27

What is Gratuity? Who is Eligible?

Gratuity is a statutory monetary benefit provided by employers to employees in recognition of long-term continuous service under the Payment of Gratuity Act, 1972. To qualify for a gratuity payout upon resignation, retirement, or career transition, an employee must complete a minimum of 5 years of continuous service with the same organization (the 5-year requirement is waived in cases of employee death or permanent disablement).

The 15/26 Statutory Gratuity Formula Explained

For organizations covered under the Act (establishments employing 10 or more people), gratuity is calculated using 15 days of last drawn basic salary for every completed year of service, operating on a 26-working-day month:

Gratuity = (Last Drawn Basic Salary + DA) × (15 / 26) × Completed Years of Service

Why 26 Days? Indian labor law considers 26 working days in a month, excluding 4 statutory Sundays. This makes 15/26 equivalent to approximately half a month's basic salary for every year served.

Tenure Rounding Rules: The 6-Month Threshold

When calculating completed years of service, any fraction of service exceeding 6 months is rounded UP to the next full year:

  • 4 Years & 7 Months: Rounded up to 5 years (Employee becomes eligible for Gratuity!).
  • 6 Years & 8 Months: Rounded up to 7 years.
  • 5 Years & 4 Months: Truncated to 5 years.

Numerical Example: Gratuity Payout on 10 Years Service

Let's calculate the exact gratuity payout for an employee resigning after 10 years of service with a last drawn Monthly Basic Salary of ₹60,000:

  • 15 Days Basic Salary: ₹60,000 × (15 / 26) = ₹34,615.38 per year of service.
  • Total Statutory Gratuity Payout (10 Years): ₹34,615.38 × 10 = ₹3,46,154.
  • Income Tax Exemption under Section 10(10): The entire payout of ₹3,46,154 is 100% Tax-Free because it falls well within the statutory ₹20 Lakhs lifetime tax-free limit!

Covered vs. Non-Covered Establishments Comparison

  • Covered under Gratuity Act: Uses the 15/26 formula based on 26 working days.
  • Not Covered under Gratuity Act: Uses the 15/30 formula based on 30 calendar days: Gratuity = (Last Drawn Basic Salary) × (15 / 30) × Years of Service.

Related Tools & Guides: Calculate your monthly provident fund accumulation using our EPF Calculator or estimate your total monthly take-home cash using our CTC Calculator. Read our detailed guide on How HR Calculates Salary.

Disclaimer: CTC Calculator provides calculations based on the Payment of Gratuity Act, 1972 and standard Indian payroll guidelines for educational purposes. Actual structures may vary based on company policy. Please consult a Chartered Accountant or HR professional for formal tenure settlements.

Calculation Methodology & Statutory Slabs

Our salary intelligence engine runs entirely local client-side scripts in your browser. No private salary figures or professional parameters are transmitted to external servers or logged, guaranteeing absolute data safety. Calculations align with standard Indian corporate payroll systems and regulatory guidelines:

  • Income Tax Slabs (Budget FY 2026-27): Updated to incorporate standard deductions and slabs. Tax calculations default to the New Tax Regime (the national default scheme) but support comparative breakeven projections under the Old Tax Regime. Standard deduction is projected at ₹75,000 for the New Regime and ₹50,000 for the Old Regime.
  • Employees' Provident Fund (EPF): Calculated at the statutory rate of 12% of Basic Salary under the Employees' Provident Fund Scheme, 1952. Support is provided for standard capping (restricted to ₹15,000 basic limit, resulting in ₹1,800/month employee contribution) and uncapped contributions.
  • Gratuity Provision: Projected at 4.81% of Basic Salary (equivalent to 15/26 of basic salary per year of service) under the Payment of Gratuity Act, 1972. Statutory tax exemption is capped at ₹20 Lakhs.
  • Professional Tax (PT): State-wise slabs are based on the latest boundaries and limits enacted by respective state departments.

For more details, please review our Editorial Policy, read our full Disclaimer, or consult a Chartered Accountant for corporate tax planning.

Gratuity Calculator FAQs

Quick answers to common questions about gratuity eligibility and calculations

Only your last drawn Basic Salary and Dearness Allowance (DA) are used. Other allowances like HRA, special allowance, and performance bonuses are excluded from the calculations.
What is the maximum limit for tax free gratuity?
The maximum tax free limit for gratuity is Rs 20 Lakhs in a lifetime. If you receive gratuity from multiple employers over your career, the combined tax-exempt amount cannot exceed this limit.
Does a gap in employment affect my gratuity eligibility?
Yes, you must have five years of continuous service. Standard leaves like maternity leave or sick leave do not break continuity, but an official resignation and rehire will reset your tenure.