Calculate gratuity payable under the Payment of Gratuity Act and how much of it is tax-exempt.
Based on FY2026-27 rules · Last updated
Gratuity is a lump-sum payment for long-term service, calculated from your last drawn salary and years of service — but the entitlement amount and the tax-exempt amount aren't the same thing. Gratuity is only tax-exempt up to ₹20 lakh under Section 10(10); anything above that is taxable.
Enter your last drawn Basic + DA and years of service to see both the full entitlement and the exempt portion.
Gratuity Payable
₹1,15,385
Tax-exempt: ₹1,15,385 · Taxable: ₹0
Exemption Cap
₹20L
Rounded Years
5
Gratuity = (15 × last drawn Basic + DA × years of service) ÷ 26. It's tax-exempt up to ₹20 lakh under Section 10(10) for non-government employees; government employees are fully exempt with no cap. A service period with more than 6 months in the final year rounds up to the next full year.
Note: This calculator applies the standard Payment of Gratuity Act formula. The five-year eligibility requirement is waived on death or disablement, in which case the full amount is tax-exempt regardless of the ₹20 lakh cap.
Example: with a last drawn Basic + DA of ₹40,000 and 5 years of service, gratuity is (15 × 40,000 × 5) ÷ 26 = ₹1,15,385. Because this is below the ₹20 lakh cap, the whole amount is tax-exempt.
| Input / result | Value |
|---|---|
| Last drawn Basic + DA (monthly) | ₹40,000 |
| Years of service | 5 |
| Gratuity payable | ₹1,15,385 |
| Tax-exempt limit | ₹20,00,000 |
| Taxable gratuity | ₹0 |
At least five continuous years of service with the same employer, under the Payment of Gratuity Act — except in cases of death or disablement, where this requirement is waived entirely.
Gratuity is tax-exempt up to ₹20 lakh under Section 10(10) for employees covered by the Payment of Gratuity Act. Any amount above ₹20 lakh is taxable. Government employees are fully exempt with no cap.
For employees covered by the Payment of Gratuity Act, gratuity = (15 × last drawn monthly Basic + Dearness Allowance × years of service) ÷ 26. The 26 reflects the working days in a month. For example, ₹40,000 Basic + DA and 5 years of service gives (15 × 40,000 × 5) ÷ 26 = ₹1,15,385. A final year of more than six months is rounded up to a full year.
Private-sector employees in establishments covered by the Payment of Gratuity Act use the same formula: (15 × last drawn Basic + DA × years of service) ÷ 26. Use Basic plus Dearness Allowance, not CTC, as the salary figure. If your employer is not covered by the Act, you have no statutory entitlement: any gratuity depends on your appointment letter or company policy, and some employers use 30 instead of 26 as the divisor, so check your terms.
Gratuity is tax-exempt up to ₹20 lakh for private-sector employees covered by the Payment of Gratuity Act, and the amount above that is taxable as salary. Government employees' gratuity is fully exempt. The calculator shows both the entitlement and the exempt portion.
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