Gratuity Calculator: Formula, Eligibility + ₹20L Limit (2026)
Gratuity-Act-covered? Formula = 15 × monthly salary × years ÷ 26. Others: half-month × years. Tax-free to ₹20L lifetime (both regimes) after 5 years. Calculate below.
Gratuity calculator
Eligibility + tax rules
- 5-year rule: payable after 5 years of continuous service (one establishment); waived on death/disablement.
- 6-month rounding (Act-covered): a fraction above 6 months counts as a full year — 12 yrs 7 months = 13 years.
- ₹20L lifetime cap across all employers, both regimes. PSU/bank staff count as private employees here.
- Leave encashment (₹25L) is a separate, independent exemption — claim both at exit.
By TaxSetu Editorial Team · Last reviewed: 7 October 2026
Based on the Income-tax Act 2025, Income Tax Rules 2026 and CBDT notifications; sections per the Income-tax Act 1961 (as amended) with 2025-Act mappings where notified · Verify on the official portal: incometax.gov.in
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Frequently Asked Questions
Covered under the Gratuity Act: 15 × last monthly Basic+DA × years ÷ 26. Not covered: half-month salary × years. Both capped at ₹20L tax-free.
Yes, continuous service with one establishment — waived on death/disablement. Act-covered staff also get 6-month rounding (12y 7m = 13 years).
Yes — the ₹20L lifetime exemption works in both regimes. All exit payouts.
No — PSU/bank staff count as private employees with the ₹20L cap; only pure government staff are fully exempt.