Fifteen days per completed year of service, capped at twenty lakhs, with the strict six-month rounding rule. Handles part-month service correctly.
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The standard formula is fifteen days of last drawn basic salary for every completed year of service, computed as (15/26 × basic × years). The twenty-six denominator represents the number of working days in a month under the act.
Eligibility kicks in at five completed years of continuous service, except in cases of death or disablement where the threshold is waived.
Service of more than six months in a year counts as a full year. Service of six months or less in a year does not count. Many calculators apply a softer round-up rule that overstates gratuity in the employee's favour. The strict rule is what the act specifies.
Apply the strict rule by default; round in the employee's favour only as an explicit company policy decision, documented separately.
Gratuity is capped at twenty lakhs (₹20,00,000) per the 2018 amendment. Computed gratuity above this cap is paid out at the cap value. For senior employees with long tenure, this cap will bind.
The cap applies per employer; cumulative gratuity across multiple employers can exceed it.
Gratuity up to the lower of the calculated amount or the act's twenty-lakh cap is exempt under Section 10(10) of the Income Tax Act for non-government employees. Amounts above the cap are taxable as salary.
Basic salary plus dearness allowance, where applicable. House rent allowance, special allowance, and bonuses are not included. The 'last drawn' basic is the one in force on the last day of service.
The five-year eligibility waiver for death and disablement cases is supported. Nominee details are captured separately during F&F processing.
Gratuity is one of five line items in the full-and-final settlement; the others are notice pay, leave encashment, recoveries, and statutory deductions. See our F&F estimator for the full sequence.
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