Payment of Gratuity Act 1972 · FY 2025-26 (AY 2026-27)
Gratuity calculator
Fifteen days of pay for every year served, payable only once you have completed five. Here is what that comes to, and how much of it is tax-free.
Rates reviewed 10 November 2026 · Estimates only, not tax advice. Verify against the current Finance Act before you rely on a figure.
Service beyond six months in the final year counts as a full year. Below five years, nothing is payable — except on death or disablement.
The formula
15 ÷ 26 × last drawn monthly pay × years
26 is the assumed number of working days in a month, 15 the days of pay earned per year of service, under the Payment of Gratuity Act 1972.
Gratuity payable
₹2,88,462
After 10 years of service
The lifetime exemption is ₹20,00,000 across all employers, u/s 10(10).
FY 2025-26 (AY 2026-27). Covers establishments under the Payment of Gratuity Act 1972 — ten or more employees. Estimates only, not tax advice.
Questions people actually search
Answered
How is gratuity calculated in India?
For establishments covered by the Payment of Gratuity Act 1972, the formula is 15 ÷ 26 × last drawn monthly basic salary including dearness allowance × number of completed years of service. The 26 represents assumed working days in a month and the 15 represents the days of pay earned per year served. Service of more than six months in the final year rounds up to a full year.
Do I get gratuity if I leave before five years?
Generally no. Five years of continuous service is the eligibility threshold under Section 4. The exception is death or disablement, where gratuity is payable regardless of length of service and is paid to the nominee or legal heir. Some courts have allowed a claim at four years and 240 days in the fifth year, but that reading is not universally applied — do not count on it.
Is gratuity taxable?
Up to a point. For private-sector employees covered by the Act, gratuity is exempt under Section 10(10) up to ₹20,00,000, and that ceiling is a lifetime limit across all employers — not per job. Anything above it is taxable as salary. Government employees receive their gratuity fully exempt.
Which employers must pay gratuity?
Every factory, mine, oilfield, plantation, port, railway company and shop or establishment employing ten or more persons on any day in the preceding twelve months. Once the Act applies it continues to apply even if headcount later falls below ten. Employers outside its scope may still pay gratuity contractually, often on more generous terms.
Is gratuity part of CTC?
Usually it is shown inside CTC, at roughly 4.81% of annual basic — the annualised cost of the 15/26 obligation. But it is not pay: you receive nothing until you complete five years, and you forfeit it entirely if you leave sooner. Treating it as part of your take-home in year one overstates what you will actually be paid.
When must gratuity be paid after resignation?
Within thirty days of it becoming payable. If the employer delays beyond that, simple interest is payable on the amount from the due date until payment. Gratuity may be forfeited only in narrow circumstances — damage caused by the employee, or termination for riotous conduct or an offence involving moral turpitude.
Employment contracts that say what they owe
Dyopact keeps employment agreements, their notice periods and their obligations on one record — so what was promised is what gets tracked.