Gratuity Calculator — Know How Much Your Employer Owes You — India 2026
Calculate gratuity amount based on your last drawn salary and years of service. Understand the Payment of Gratuity Act 1972 rules and tax exemption limits.
Gratuity is a lump sum benefit paid by your employer when you leave the company after completing at least 5 years of continuous service. It is a token of appreciation for your loyalty and service. The amount depends on your last drawn basic salary plus dearness allowance and your total years of service. Under the Payment of Gratuity Act 1972 the maximum tax-free gratuity limit was increased to Rs 20 lakh. Understanding your gratuity entitlement helps in retirement planning and job change decisions.
How is gratuity calculated?
Gratuity is calculated using the formula: Gratuity = (Last Drawn Basic Salary + DA) x 15 x Years of Service / 26. The 15 represents 15 days of salary per year of service and 26 represents working days in a month. Each completed year beyond 6 months is rounded up. For example with a basic salary of Rs 50000 and 10 years of service your gratuity would be Rs 2.88 lakh.
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How Tax Calculation Works
Income tax is calculated on your total taxable income after deducting eligible exemptions and deductions from your gross income. The tax is applied progressively — you pay a lower rate on initial income slabs and higher rates only on income that exceeds each threshold. This means moving into a "higher tax bracket" does not mean your entire income is taxed at the higher rate. Understanding marginal vs effective tax rate is crucial: your marginal rate applies only to the last rupee earned, while your effective rate is the average across all slabs.
Tax-Saving Strategies
Under the old regime, maximize deductions: Section 80C allows up to Rs 1.5 lakh through PPF, ELSS, EPF, and life insurance. Section 80D covers health insurance premiums up to Rs 25,000 (Rs 50,000 for senior citizens). Section 80CCD(1B) offers an additional Rs 50,000 deduction for NPS contributions. Home loan interest up to Rs 2 lakh is deductible under Section 24. Under the new regime, the Rs 75,000 standard deduction and lower slab rates may save you more if your total deductions are below Rs 3.75 lakh. Calculate under both regimes before choosing.
Key Information
| Parameter | Details |
|---|---|
| Gratuity Formula | (Basic + DA) x 15/26 x Years of Service |
| Minimum Service Required | 5 years continuous |
| Maximum Tax-Free Gratuity | Rs 20 lakh |
| Applicable To | Companies with 10+ employees |
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Use Calculator NowFrequently Asked Questions
How is gratuity calculated?
Gratuity is calculated using the formula: Gratuity = (Last Drawn Basic Salary + DA) x 15 x Years of Service / 26. The 15 represents 15 days of salary per year of service and 26 represents working days in a month. Each completed year beyond 6 months is rounded up. For example with a basic salary of Rs 50000 and 10 years of service your gratuity would be Rs 2.88 lakh.
Is gratuity taxable?
Gratuity received by government employees is fully exempt from income tax. For private sector employees covered under the Gratuity Act the exemption is limited to the least of: actual gratuity received or Rs 20 lakh or the amount calculated using the formula. Any amount exceeding this is taxable under your applicable tax slab.
Do I get gratuity if I resign?
Yes you are entitled to gratuity even if you resign voluntarily provided you have completed 5 years of continuous service with the employer. The 5-year rule is mandatory and there are very limited exceptions. Some companies may have a gratuity policy that is more generous than the statutory requirement.
Which tax regime should I choose — old or new?
Choose the new regime if your total deductions are below Rs 3.75 lakh. Choose the old regime if you claim HRA, 80C (Rs 1.5L), 80D, home loan interest, and NPS totaling more than Rs 3.75 lakh. Salaried employees can switch every year.
Is income up to Rs 12 lakh really tax-free?
Under the new regime for FY 2025-26, income up to Rs 12 lakh is effectively tax-free due to Section 87A rebate. After Rs 75,000 standard deduction, taxable income is Rs 11.25 lakh which qualifies for full rebate. However, income even slightly above Rs 12 lakh loses this entire benefit.
How can I save more tax legally?
Under the old regime, maximize 80C (Rs 1.5L via PPF, ELSS, EPF), 80D (Rs 25K-50K for health insurance), 80CCD(1B) (Rs 50K for NPS), HRA exemption, and home loan interest (Rs 2L under Section 24).
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Last updated: March 2026