Gratuity Calculator for Govt & Private Employees

For central government employees in 2026, the gratuity formula is: (Last Drawn Basic Pay + DA) × 15 × Qualifying Service Years ÷ 30. The divisor is 30 (calendar days) for government employees, unlike private sector (covered under Gratuity Act) where divisor is 26. Central govt employees are not covered under the Payment of Gratuity Act 1972 — they are governed by Central Civil Services (Pension) Rules. The maximum gratuity for central government employees is ₹25 lakh, which is higher than the ₹20 lakh limit for private sector employees.

The minimum qualifying service required for gratuity eligibility is 5 years of continuous service for most employees. However, for government employees who retire on superannuation or die in service, gratuity is payable even if service is less than 5 years — a death gratuity is paid to nominees. For resignation before 5 years, no gratuity is payable. For retirement after 5 years, service gratuity is payable. For retirement after 10 years (for central govt employees), retirement gratuity based on the 15/30 formula is applicable.

No. Gratuity received by central government, state government, and local authority employees is fully exempt from income tax under Section 10(10)(i) of the Income Tax Act — with no monetary limit. The entire gratuity amount, regardless of how large it is, is tax-free for government employees. For private sector employees covered under the Payment of Gratuity Act, gratuity up to ₹20 lakh is tax-free. For private sector not covered under the Act, the least of actual gratuity, ₹20 lakh, or half month salary per year of service is exempt.

Service years are rounded as follows for gratuity calculation: if the remaining months after complete years is 6 months or more, it is rounded up to the next full year. If it is less than 6 months, it is ignored. For example: 15 years 7 months = 16 years for gratuity. 15 years 4 months = 15 years. This rounding can make a significant difference — for an employee with Basic+DA of ₹80,000, the difference between 15 and 16 years of service in gratuity is approximately ₹46,000.

In 2026, the maximum gratuity limits are: Central Government employees — ₹25 lakh (enhanced from ₹20 lakh). Private sector employees covered under the Payment of Gratuity Act 1972 — ₹20 lakh. Any gratuity amount above these limits is called ex-gratia payment and is taxable. For government employees, the limit was enhanced from ₹20 lakh to ₹25 lakh effective May 2024 to keep pace with salary increases under the 7th Pay Commission.