Payment of Gratuity Act Calculation India
पेमेंट ऑफ ग्रेच्युटी एक्ट 1972 के तहत अपनी ग्रेच्युटी राशि और धारा 10(10) के तहत ₹20 लाख तक कर-मुक्त (Tax-Free) छूट सीमा की तुरंत गणना करें।
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Calculation Methodology & Statutory Rules
Calculates statutory gratuity payable upon resignation, retirement, or termination under the Payment of Gratuity Act, 1972 and computes income tax exemption under Section 10(10) of the Income Tax Act.
1.
Eligibility Condition: - Minimum 5 years of continuous service with the same employer is mandatory (waived in cases of death or permanent disablement).
2.
Rounding of Service Tenure (Covered Employees): - Under Section 4(2) of the Act, if the employee has served more than 6 months in the final incomplete year, it is rounded up to 1 full year (e.g., 7 years 7 months = 8 years).
If <= 6 months, extra months are discarded.
3.
Formula for Covered Establishment (10+ Employees): - Gratuity Amount = (15 / 26) * (Last Drawn Monthly Basic Salary + Dearness Allowance) * Effective Tenure Years.
- Here, 15 represents days of salary and 26 represents working days per month.
4.
Formula for Non-Covered Establishment: - Effective Tenure = Completed full years only (no rounding up of months).
- Gratuity Amount = (15 / 30) * (Average Monthly Salary of Last 10 Months) * Completed Years.
5.
Income Tax Exemption u/s 10(10): - For Central/State Government employees, 100% of gratuity is tax-exempt.
- For Non-Government employees, tax-exempt gratuity is the MINIMUM of: a) Actual Gratuity Amount Received b) Statutory Gratuity Formula Amount c) Lifetime Statutory Ceiling Cap of ₹20,00,000 (₹20 Lakhs).
- Taxable Gratuity = Actual Gratuity Received - Tax-Exempt Gratuity.
Frequently Asked Questions
Q1.What is the difference between the New and Old Tax Regime in India for FY 2025-26 (AY 2026-27)?
The default New Tax Regime offers revised lower slab rates and a standard deduction of ₹75,000 for salaried individuals. With the Section 87A rebate, annual income up to ₹7.75 Lakhs is effectively zero tax. The Old Tax Regime allows claiming exemptions (HRA, LTA) and deductions under Chapter VI-A (Section 80C up to ₹1.5L, 80D health insurance, home loan interest under Section 24b) with higher slab rates.
Q2.How does Section 44ADA Presumptive Taxation work for professionals and freelancers in India?
Under Section 44ADA of the Income Tax Act, eligible professionals (IT consultants, software engineers, doctors, lawyers, chartered accountants) with gross receipts up to ₹75 Lakhs (provided cash receipts don't exceed 5%) can declare 50% of gross receipts as deemed taxable profit without needing to maintain detailed books of account or undergo tax audits.
Q3.How is Gratuity calculated under the Payment of Gratuity Act 1972?
For employees covered under the Gratuity Act who have completed at least 5 years of continuous service: Gratuity = (15 × Last Drawn Basic Salary + DA × Completed Years of Service) ÷ 26. The maximum statutory tax-free gratuity exemption limit is ₹20 Lakhs.
Disclaimer: Results are estimates based on standard tax rules for the 2026 tax year and are provided for informational purposes only. Individual circumstances (deductions, credits, specific state/local rules) may significantly affect your actual tax liability. Always consult a qualified tax professional or accountant for advice specific to your situation.