Rajkumar Anguluri·Software Engineer · Founder, Artha Engine·Last reviewed 8 April 2026·Methodology
Independent decision-support tool. Artha Engine is not a financial services provider, does not sell loans or insurance, and has no commission relationships with banks or insurers.
Gratuity Calculator
When you leave your current role, how much gratuity lands in your account — and how much of it is taxed? See the payout, the ₹20L exemption math, and whether staying another few years changes the picture meaningfully.
Your service details
Enter your last drawn basic + DA and total years of service to estimate gratuity.
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Gratuity at separation
₹3.5L
₹3.5L gratuity
(Last drawn basic × 15 × years of service) / 26
Gratuity lands tax-free up to ₹20L. Plan how you'll deploy it.
Gratuity amount
₹3.5L
Years counted
10 yrs
Tax-exempt portion
₹3.5L
Taxable portion
₹0
Benchmarks
If you stayed 5 more years
-33.3%You
₹3.5L
Benchmark
₹5.2L
Each extra year adds ~half a month of basic to your payout.
After a 30% promotion raise
-23.1%You
₹3.5L
Benchmark
₹4.5L
Gratuity is computed on your LAST drawn basic, not the average.
If employer were NOT covered
+15.4%You
₹3.5L
Benchmark
₹3L
The Act uses a 26-day-month divisor; non-covered uses 30.
What moves the result most
Holding everything else fixed, here is how the headline shifts when each input swings by a typical range.
Full gratuity is tax-free
Your entire gratuity stays below the ₹20L Section 10(10) exemption — it lands in your account tax-free.
Next best actions
The result hints at what to look at next. Each link carries your current numbers so you never re-enter them.
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Save it to your account so you can revisit it anytime, or share the scenario with someone who needs to see it.
At a glance
- What it does
- Computes gratuity entitlement at separation under the Payment of Gratuity Act (for covered employees) or the alternative 30-day method.
- Formula
- Covered: (last basic × 15 × years) ÷ 26. Not covered: (last basic × 15 × years) ÷ 30.
- Tax exemption
- Up to ₹20L is exempt under Section 10(10). Gratuity above ₹20L is added to taxable income in the year you receive it.
- Eligibility
- Minimum 5 years of continuous service with the same employer. Years above 6 months round up in the final year.
How It Works
This is the drill-down layer. The flagship flow leads with a recommendation, and this page lets you inspect the underlying model.
- Covered under the Act: Gratuity = (Last drawn basic + DA) × 15 × years of service / 26.
- Not covered under the Act: Gratuity = (Last drawn basic + DA) × 15 × years of service / 30.
- Tax exemption under Section 10(10) = minimum of: actual gratuity, ₹20L, and (basic × 15 × years) / 26.
Assumptions
The recommendation stays blunt, but the assumptions remain visible.
- Minimum 5 years of continuous service is required under the Gratuity Act.
- Years above 6 months in the final year round up (e.g., 7.6 years counts as 8).
- Section 10(10) tax exemption is capped at ₹20L for private sector employees.
FAQ
The follow-up questions people usually ask after the main recommendation is already clear.
When am I eligible for gratuity?
After completing 5 years of continuous service with the same employer. Some courts have accepted 4 years 240 days; safest to assume 5 years.
Is gratuity tax-free?
Yes, up to ₹20L under Section 10(10) for private sector employees. Anything above that gets added to your taxable income in the year you receive it.
Does gratuity apply to contract employees?
Usually not — the Payment of Gratuity Act covers regular employees of establishments with 10+ workers. Contract and consulting arrangements typically don't attract gratuity.
Sources & references
Every formula and assumption above is grounded in these authoritative sources.
Related tools & decisions
Keep going from here — each link carries the same cluster context.
What to do next
Comparison pages
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Related guides
Long-form explainers that put the math behind this tool in context.
Calculations and decision frameworks, not personalised financial advice. The numbers on this page are based on the inputs you supplied and the regulatory rules in effect when this page was last reviewed. They are not a recommendation to buy, sell, hold, port, or surrender any specific financial product. Consult a SEBI-registered investment advisor, a qualified tax professional, or a licensed insurance broker before acting on a financial decision involving your money.
Artha Engine is an educational decision-support website. We do not offer loans, sell insurance, distribute mutual funds, provide regulated investment advice, collect loan applications, or receive commissions from banks, insurers, AMCs, brokers, or other financial providers. References to RBI, SEBI, IRDAI, Income Tax Department, or other authorities are source citations only. Artha Engine is not affiliated with, endorsed by, or sponsored by any government authority, regulator, bank, insurer, AMC, or broker. Artha Engine does not charge users fees for using calculators, comparison tools, articles, or financial health scoring. Mailing address: India.
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