Gratuity Calculator India 2026 – Tax-Free ₹20L Limit | Section 10(10) Exemption

For covered employees (companies with 10+ employees), gratuity = (15/26) × Last Drawn Salary (Basic + DA) × Years of Service. For non-covered employees, gratuity = (15/30) × Salary × Years. The maximum gratuity payable is capped at ₹20,00,000 under the Payment of Gratuity Act.

Any employee who has completed at least 5 years of continuous service with the same employer is eligible for gratuity. The 5-year minimum is waived in case of death or disability. The employer must have 10 or more employees to be covered under the Payment of Gratuity Act.

The maximum tax-exempt gratuity limit under Section 10(10) is ₹20,00,000 for private sector employees. Government employees receive 100% exemption. Any gratuity amount above ₹20L is taxable as per your applicable income tax slab.

If you resign before completing 5 years of continuous service, you are not eligible for gratuity under the Payment of Gratuity Act. However, some employers may voluntarily pay an ex gratia amount. The only exceptions are death or disability, where the 5-year requirement is waived.

When you change jobs, your previous employer pays out your accumulated gratuity. This gratuity is taxable in the year of receipt under Section 10(10). The exemption limit of ₹20L applies per lifetime, not per job. If you've already claimed exemption at a previous job, the remaining exemption applies.

No, gratuity is not paid monthly. It is a lump sum payment made at the time of leaving the organization (retirement, resignation, termination, death, or disability). However, many employers accrue gratuity as a liability and may show it as part of your CTC (Cost to Company).

Covered employees work for companies registered under the Payment of Gratuity Act with 10+ employees and use the 15/26 formula. Non-covered employees work for companies with fewer than 10 employees and use the 15/30 formula, which generally results in lower gratuity. Both are subject to the ₹20L maximum cap.

In case of employer insolvency or bankruptcy, gratuity is treated as a preferential claim under the Insolvency and Bankruptcy Code. However, actual recovery may be delayed. Employees should file their claim promptly with the company's liquidator or official assignee.

Yes, but the employer may have the right to forfeit gratuity in whole or in part in case of termination due to misconduct involving moral turpitude, riotous behavior, or willful damage. However, the Supreme Court has held that gratuity forfeiture must be reasonable and proportionate.

You can submit a fresh nomination form (Form F for Gratuity) to your employer's HR or payroll department. Nomination can be changed at any time during your employment. It is advisable to review your nomination annually or after major life events like marriage, birth, or death of a family member.