• Forfeiture: Only for misconduct causing financial damage
• Nomination: Use Form F to nominate family member
• Non-payment: Criminal offence under Section 9 — up to 2 years imprisonment
💡 Just received gratuity? Here's how to invest it wisely:
🏦 Senior Citizens Savings Scheme (SCSS)
Best for retirees (60+). ~8.2% p.a. Govt-backed, 100% safe. Max ₹30 lakh. Quarterly interest payout for regular income.
📈 Balanced Mutual Funds (SWP)
For age <55 with some risk appetite. 10-12% avg returns over 5+ years. Set up SWP for monthly income from corpus.
🏠 Home Loan Prepayment
Guaranteed return = your loan rate (8.5-10.5%). Best in early loan years when interest component is highest.
🛡️ Health Insurance Super Top-up
₹15,000/year policy gives ₹50 lakh cover. One hospitalisation can wipe out gratuity — protect it first.
🏛️ NPS (National Pension System)
If below 60: NPS Tier 1 gives extra 80C + 80CCD(1B) tax benefit. Calculate NPS →
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💰 Gratuity Calculator India 2026 — Payment of Gratuity Act Formula
Gratuity is a statutory lump-sum payment under the Payment of Gratuity Act, 1972. Payable after 5 years of continuous service. Formula for covered employees: Gratuity = (Basic + DA) × 15 × Years ÷ 26. For non-covered (fewer than 10 employees): divisor changes to 30. Tax-free up to ₹20 lakh for private employees (Section 10(10)). Government employees receive entire gratuity 100% tax-free with no upper limit.
New Labour Code 2026: Contract/fixed-term employees eligible after just 1 year. Supreme Court ruling: 4 years + 240 days qualifies as 5 years. Rounding rule: Last year exceeding 6 months is rounded up. SuccessMate's calculator handles all three employee types, shows complete year-wise table, and calculates exact tax-exempt vs taxable amounts under Section 10(10).
Examples: Private employee, Basic+DA ₹50,000, 10 years: Gratuity = (50,000÷26)×15×10 = ₹2,88,461. Govt employee, Basic+DA ₹60,000, 30 years: (60,000÷26)×15×30 = ₹10,38,461 — fully tax-free. NRI employees at Indian companies are also covered under the Act. Use this tool to plan your retirement finances, negotiate with employers, and understand your statutory rights.
📋 Gratuity Rules & Eligibility — India 2026
Gratuity is mandatory for all establishments with 10+ employees under Section 4 of the Payment of Gratuity Act. Employers must pay within 30 days of the due date — delayed payments attract interest under Section 7(3A). Non-payment is a criminal offence under Section 9 (up to 2 years imprisonment + ₹20,000 fine). The ₹20 lakh limit is a lifetime ceiling — if you received gratuity from a previous employer, the remaining exempt amount reduces accordingly. Only Basic Salary and Dearness Allowance (DA) are included in the calculation — HRA, bonus, commissions, and other allowances are excluded. Gratuity can be forfeited only if the employee is dismissed for misconduct causing financial damage to the employer.
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❓ Frequently Asked Questions — Gratuity Calculator India 2026
What is gratuity and who is eligible? ▾
Gratuity is a statutory lump-sum payment by an employer under the Payment of Gratuity Act, 1972. Eligible if: (1) Minimum 5 years continuous service with same employer, (2) employer has 10+ employees, (3) payable on resignation, retirement, superannuation, death, or permanent disability. The 5-year rule is waived for death or permanent disability. Under new Labour Code, contract employees need only 1 year.
What is the gratuity formula for India 2026? ▾
Covered employees (10+ employees): Gratuity = (Basic + DA) × 15 × Years ÷ 26. Non-covered employees: (Basic + DA) × 15 × Years ÷ 30. Only Basic Salary and Dearness Allowance are included — not HRA, bonus, or other allowances. If last year of service exceeds 6 months, it rounds up to the next full year. Maximum ₹20 lakh for private employees.
Is gratuity taxable in India? ▾
Government employees: Entire gratuity is 100% tax-free (no limit). Private employees (covered): Tax-free up to ₹20 lakh lifetime limit under Section 10(10). Private employees (not covered): Tax-free up to lower of actual gratuity, ₹20 lakh, or half-month average salary × years. Amount above the applicable limit is taxable at your income slab rate.
Can I get gratuity before completing 5 years? ▾
Generally no. But 4 years + 240 days qualifies as 5 years for covered employees (Supreme Court ruling — Surinder Singh vs Central Govt, 1986). If the last year of service exceeds 6 months, it rounds up. The 5-year rule is completely waived in case of employee's death (gratuity paid to nominee) or permanent disability. Under new Labour Code, contract employees eligible after 1 year.
What is the maximum gratuity limit in India 2026? ▾
₹20 lakh for private sector employees — this is a lifetime limit across all employers combined. If you received ₹5 lakh gratuity from a previous employer, only ₹15 lakh remains tax-free from the next employer. For government employees, there is no upper ceiling — entire amount is tax-free. Employers can pay more than ₹20 lakh, but the excess is taxable.
What if my employer refuses to pay gratuity? ▾
Employers must pay within 30 days. If they don't, they owe interest under Section 7(3A). File a complaint with the Controlling Authority (District Labour Commissioner). Non-payment is a criminal offence under Section 9 — punishable with imprisonment up to 2 years and fine up to ₹20,000. You can also approach the Labour Court or High Court for writ petition.
Is gratuity included in CTC? How is it calculated? ▾
Yes, most employers include gratuity in CTC at approximately 4.81% of Basic salary (= Basic/26 × 15). However, this CTC component belongs to you only after completing 5 years. If you leave before 5 years (except death/disability), you forfeit it. When negotiating salary, ask for Basic salary separately and calculate the actual in-hand after PF and gratuity deductions.
How is gratuity different from PF? ▾
PF (Provident Fund): Monthly contributions by both employer and employee (12% each of Basic+DA). Accumulates throughout service. Accessible anytime after leaving. Gratuity: No monthly contributions. One-time payment only after 5 years of service. Only employer pays — employee contributes nothing. Both are retirement/exit benefits but work very differently. Use our EMI or SIP calculators for financial planning.