Gratuity Calculator Pro (2026) & Form I Settlement Advice
Compute statutory gratuity under the Payment of Gratuity Act, 1972 using the official 15/26 rule, apply the 6-month service rounding principle, evaluate Section 10(10) tax exemptions (up to ₹20 Lakhs), and generate an A4 employee settlement statement.
domain 1. Establishment Coverage & Law
(15 × Last Drawn Basic+DA × Years) / 26. Service in excess of 6 months in final year is rounded up to the next full year.
work_history 2. Salary Components & Tenure
Monthly basic pay at retirement / exit
Included in wage definition (if applicable)
> 6 months rounds up to 1 full year
currency_rupee 3. Actual Gratuity & Tax Planning
Leave matching statutory calculation or enter discretionary ex-gratia amount
badge 4. Employee & Employer Details
1. Qualifying Service Tenure & Wage Determination
| Parameters / Particulars | Value / Metric | Statutory Basis / Provision |
|---|---|---|
| Actual Service Period | 8 Years 7 Months | Date of Joining to Date of Separation |
| Qualifying Years of Service | 9 Years | Rounded up per 6-month rule (Section 4(2)) |
| Last Drawn Basic Pay | ₹85,000.00 | Monthly fixed salary component |
| Dearness Allowance (DA) | ₹15,000.00 | Included in statutory wage definition under Sec 2(s) |
| Total Qualifying Monthly Wages (Basic + DA): | ₹1,00,000.00 | Basis for gratuity computation |
2. Statutory Gratuity & Section 10(10) Tax Schedule
| Component / Particulars | Amount (₹) | Tax Status & Compliance |
|---|---|---|
|
Statutory Gratuity (15/26 Formula)
(15 × ₹1,00,000 × 9) / 26
|
₹5,19,231.00 | Entitlement under Section 4(2) |
|
Actual Gratuity Payable by Employer
Proposed disbursement in full & final settlement
|
₹5,19,231.00 | Full settlement |
|
Section 10(10) Tax Exemption
Least of: Actual, Statutory, or ₹20,00,000 ceiling
|
-₹5,19,231.00 | 100% Tax-Free (Exempt) |
| Taxable Gratuity Added to Income from Salaries: | ₹0.00 | No TDS required under Section 192 |
| Net Disbursed Gratuity Amount: | ₹5,19,231.00 | Electronic NEFT/RTGS Transfer |
3. Section 7(3) Statutory Settlement Mandate
In accordance with Section 7(3) of the Payment of Gratuity Act, the employer must arrange to pay the amount of gratuity within 30 days from the date it becomes payable. Failure to pay within the statutory window attracts mandatory simple interest under Section 7(3A) @ 10% per annum.
Statutory Guide: Payment of Gratuity Act, 1972 & Tax Rules (2026)
calculate The 15/26 Working Day Rule
A month is treated as consisting of 26 working days (excluding 4 Sundays). Gratuity is computed as 15 days of wages for every completed year of service: (15 × Last Drawn Basic+DA × Years) / 26.
verified ₹20 Lakh Exemption Limit
Under Section 10(10) of the Income Tax Act, non-government private employees enjoy a lifetime statutory exemption cap of ₹20,00,000. Government employees receive 100% tax-free gratuity without any ceiling.
Frequently Asked Questions (FAQs)
Is the 5-year continuous service rule mandatory?
Under Section 4(1), an employee must complete at least 5 years of continuous service to become eligible for gratuity upon resignation or retirement. Exception: The 5-year condition does NOT apply if termination is due to death or disablement due to accident or disease.
How are fractions of a year rounded?
For establishments covered under the Act, if the employee has served more than 6 months in the terminal year (e.g. 5 years and 7 months), it is rounded up to the next full year (6 years). If 6 months or less (e.g. 5 years and 5 months), it is rounded down to 5 years.
What happens if the employer delays payment beyond 30 days?
Under Section 7(3A), if gratuity is not paid within 30 days from the date it becomes payable, the employer is legally liable to pay simple interest at the rate specified by the Central Government (currently 10% per annum) for the period of delay.