What Is Gratuity?

A lump sum an employer pays when you leave after at least five years of service.

Tax

Under the Payment of Gratuity Act it is last basic pay plus DA × 15 ÷ 26 × years of service, with a final part-year over six months counted as a full year. Fixed-term employees qualify after one year.

Up to ₹20 lakh is free of income tax for private sector employees.

Example

₹50,000 basic and 10 years 7 months of service: ₹50,000 × 15 ÷ 26 × 11 = ₹3,17,308.

Gratuity calculator

Tax

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Tax15 Oct 2026 · 6 min readOld vs New Tax Regime for FY 2026-27: Three Salaries, Worked OutThe new tax regime is now the default, and for most salaried people it is also cheaper. Here is the arithmetic for salaries of Rs 12 lakh, Rs 20 lakh and Rs 30 lakh, and the one question that tells you when the old regime still wins.Read the guide →

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