As per the Payment of Gratuity Act, 1972 — the 15/26 formula with the ₹20 lakh exemption.
Gratuity payable
Exempt up to ₹20,00,000 for non-government employees; excess is taxable.
Gratuity = (15 ÷ 26) × last monthly salary (Basic + DA) × completed years of service. A part-year of 6 months or more counts as a full year. The maximum tax-exempt gratuity is ₹20,00,000.
Usually after 5 years of continuous service (not required in case of death/disablement).
For non-government employees, it is exempt up to ₹20,00,000 (lifetime); any excess is taxable as salary.
The formula uses 15/30 and average of last 10 months' salary; this calculator uses the standard 15/26 covered-employee method.
Salary, gratuity, HRA & deductions — income-tax computation in minutes.
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