Gratuity Calculator India – The 15/26 Rule Explained
Gratuity is a monetary benefit provided by an employer to an employee for services rendered to the organization. It is governed by the Payment of Gratuity Act, 1972.
Eligibility for Gratuity
To be eligible for gratuity, an employee must have completed a minimum of 5 years of continuous service with the same employer. Exceptions are made in cases of death or disablement.
The Gratuity Calculation Formula
For employees covered under the Act, the formula is:
Gratuity = (15 × Last drawn salary × Years of service) / 26
- Last drawn salary: This includes Basic Salary + Dearness Allowance (DA).
- 15: Wages for 15 days per year of service.
- 26: Total working days in a month.
- Years of service: Rounded to the nearest year (e.g., 5 years 7 months is counted as 6 years).
Frequently Asked Questions
Is gratuity taxable? ▼
For government employees, gratuity is entirely tax-free. For private sector employees covered under the Act, gratuity is tax-exempt up to ₹20 Lakhs.
What if I resign after 4 years and 10 months? ▼
Technically, 4 years and 240 days of continuous service can be considered as 5 years under certain interpretations, making you eligible for gratuity. However, this varies by company policy and legal precedent.