How gratuity is calculated
For employers covered by the Payment of Gratuity Act, service of more than six months in the final year is rounded up to a full year. For employers not covered, half a month’s average salary is paid for each completed year.
Gratuity up to ₹20 lakh is tax-free for private-sector employees; government employees’ gratuity is fully exempt. Under the new labour codes, fixed-term employees become eligible after one year.
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Frequently Asked Questions
Who is eligible for gratuity?
Employees with at least five years of continuous service with an employer covered by the Act. The five-year condition does not apply on death or disability.
Is 4 years 7 months counted as 5 years?
Courts have held that 240 days of work in the fifth year can count as a completed year; the calculator flags this case as eligible.
What is the maximum gratuity?
The statutory ceiling and the tax exemption are both ₹20 lakh.
Is gratuity taxable?
It is tax-free up to ₹20 lakh for private-sector employees. Any amount above that is taxed as salary.
This calculator gives an estimate based on the rules shown above. Rates and limits change through budgets and notifications – confirm with a professional before you file or pay.