What you are owed at every basic salary and tenure — and the five-year line that decides whether you get anything at all.
Short answer: gratuity is (Basic + DA) × 15 × years ÷ 26, payable after five years of continuous service and tax-free up to ₹20 lakh. On ₹50,000 basic and ten years, that is ₹2,88,462. Below five years you receive nothing.
Payment of Gratuity Act, 1972 · Figures are indicative, as of August 2026
| Basic salary | 5 years | 10 years | 20 years | 30 years |
|---|---|---|---|---|
| ₹15,000 | ₹43,269 | ₹86,538 | ₹1.73 L | ₹2.60 L |
| ₹20,000 | ₹57,692 | ₹1.15 L | ₹2.31 L | ₹3.46 L |
| ₹25,000 | ₹72,115 | ₹1.44 L | ₹2.88 L | ₹4.33 L |
| ₹30,000 | ₹86,538 | ₹1.73 L | ₹3.46 L | ₹5.19 L |
| ₹40,000 | ₹1.15 L | ₹2.31 L | ₹4.62 L | ₹6.92 L |
| ₹50,000 | ₹1.44 L | ₹2.88 L | ₹5.77 L | ₹8.65 L |
| ₹75,000 | ₹2.16 L | ₹4.33 L | ₹8.65 L | ₹12.98 L |
| ₹1,00,000 | ₹2.88 L | ₹5.77 L | ₹11.54 L | ₹17.31 L |
| ₹1,50,000 | ₹4.33 L | ₹8.65 L | ₹17.31 L | ₹25.96 L |
| ₹2,00,000 | ₹5.77 L | ₹11.54 L | ₹23.08 L | ₹34.62 L |
Only basic pay plus dearness allowance counts. HRA, special allowance and bonus are excluded.
Gratuity is all-or-nothing. Four years and eleven months of service pays exactly zero; five years pays the full formula amount. There is no pro-rata below the line.
Two things soften it. Death or disablement waives the requirement entirely. And Section 2A defines continuous service in working days — courts have repeatedly held that four years plus 240 working days in the fifth year qualifies, which is roughly four years and ten and a half months.
Under the Code on Social Security, 2020, fixed-term employees become eligible after one year rather than five.
The divisor is 26, not 30. A month is treated as 26 working days, excluding Sundays. Calculators using 30 understate the payout by about 13%.
The ₹20 lakh exemption is a lifetime limit. Not per employer, not per event — cumulative across your whole career. Claim ₹6 lakh at one job and ₹14 lakh remains for every future job combined. Keep your settlement letters.
(Last drawn Basic + DA) × 15 × completed years of service ÷ 26. The 26 represents working days in a month, excluding Sundays. Only basic pay and dearness allowance count — HRA, allowances and bonus are excluded.
For private sector employees it is exempt up to ₹20 lakh under Section 19(1) (Table Sl. Nos. 3-6), and that ceiling is a lifetime cumulative limit across all employers rather than a fresh allowance at each job. Government employees receive gratuity fully exempt.
Related: Gratuity Calculator · In-Hand Salary by CTC · Income Tax by Salary · Salary Slip Explained
A note on section numbers. The Income-tax Act, 2025 replaced the Income-tax Act, 1961 with effect from 1 April 2026. Section numbers on this page are those of the 2025 Act. Where you know a provision by its old number, the mapping is: 115BAC → 202, 87A → 156, 16(ia) → 19, 80CCD(2) → 124, 112A → 198, 10(10) → 19(1) Table Sl. Nos. 3-6.
The official pages this page is checked against. If one of them disagrees with us, it wins.
Written and checked by the PaisaSamajh editorial desk · Last reviewed: 24 August 2026 · How we check this →