For employees covered under the Payment of Gratuity Act, gratuity is calculated as (15/26) × last drawn basic + DA × completed years of service. Applies after 5+ years of continuous service.
For employees covered under the Payment of Gratuity Act, gratuity is calculated as (15 ÷ 26) × last drawn monthly salary (basic + DA) × number of completed years of service. The '26' represents working days in a month, and '15' represents 15 days' wages for each completed year of service. This benefit becomes payable only after 5 or more years of continuous service with the same employer (except in cases of death or disability, where the 5-year rule doesn't apply).
There's a statutory cap on tax-exempt gratuity — currently ₹20 lakh for private-sector employees — beyond which any additional gratuity received becomes taxable. Government employees typically receive full tax exemption on their gratuity with no cap.
You generally need 5 full years of continuous service. If your final year of service is 6 months or more past your 5th (or any subsequent) work anniversary, it's typically rounded up to the next full year for gratuity calculation — check your company's specific policy.
Yes — gratuity isn't limited to retirement or termination by the employer. As long as you've completed the minimum 5 years of continuous service, you're entitled to it even if you resign.
Only up to ₹20 lakh (for private-sector employees) is tax-exempt in your lifetime across all employers combined. Any amount received above this cumulative limit is added to your taxable income.