Key Employment Benefit Summary
Gratuity is a statutory monetary benefit paid by employers to employees who have rendered at least 5 years of continuous service. Under Section 10(10), up to ₹20 Lakhs is 100% tax-free for private-sector employees.
Calculate Your Gratuity Payout →Whether you are resigning to join another company, retiring, or negotiating your full-and-final (FnF) exit settlement, calculating your exact statutory gratuity entitlement is essential to ensure your employer pays what you are legally owed.
The Statutory Gratuity Formula (15/26 Rule)
Under the Payment of Gratuity Act 1972, an employee's monthly salary is divided by 26 working days (excluding 4 Sundays per month) to determine their single-day wage rate, multiplied by 15 days of wages for every completed year of service:
Rounding Rule for Tenure:
For employees covered under the Act, if your service tenure in the last year exceeds 6 months (e.g. 7 years and 7 months), it is legally rounded up to the next full year (i.e. 8 years).
The 5-Year Eligibility Rule: Can You Get Gratuity in 4.5 Years?
Section 4(1) of the Act specifies that gratuity becomes payable on the termination of employment after rendering continuous service for not less than 5 years. However, under legal precedents established by the Supreme Court and High Courts in India:
- 6-Day Work Week: Completing 4 years and 240 days of actual working service is legally treated as 5 full continuous years.
- 5-Day Work Week: Completing 4 years and 190 days of service satisfies the continuous service requirement.
Tax Exemption Rules under Section 10(10)
- Government Employees: 100% tax-free with zero cap.
- Private Sector Employees: Gratuity is tax-exempt up to a cumulative lifetime limit of ₹20,00,000 (₹20 Lakhs). Any amount paid above ₹20 Lakhs is added to taxable income and taxed at normal slab rates.
Calculate Your Exact Gratuity Settlement
Use our free Gratuity Calculator to enter your last basic salary and service tenure to get an instant breakdown of your legal payout and tax-exempt amount.