Salary
How gratuity is calculated in India: 15/26 rule & limits
For employees covered under the Act, gratuity equals (15 × last drawn basic salary + DA × completed years of service) ÷ 26.
Eligibility criteria and the 5-year rule
Under Section 4(1) of the Payment of Gratuity Act, 1972, an employee becomes eligible for gratuity upon continuous service of at least 5 years with the same establishment, payable on resignation, retirement, superannuation, or termination.
The 15/26 formula explained
For covered establishments, one month is treated as 26 working days (excluding 4 Sundays). Gratuity is computed at 15 days of wages for every completed year of service. Any service period exceeding 6 months in the final year is rounded up to a full year.
Statutory tax exemption ceiling
Under Section 10(10) of the Income Tax Act, gratuity received by private sector non-government employees is tax-exempt up to a lifetime statutory ceiling of ₹20,00,000. Any gratuity paid above this threshold is taxed at the employee's applicable slab rate.
How to check a salary estimate
Start with the offer's annual CTC, then separate employer-side costs from gross pay. Check employee PF, professional tax, the selected regime and any eligible deductions against the offer letter or payslip. Multiply a stable monthly take-home by 12 only when you are calculating annual take-home—not annual CTC.
This guide is for general education. Rules, lender terms, bank terms and individual circumstances can change the result.
Use the relevant calculatorFrequently asked questions
Is the calculator result an official payslip?
No. It is a planning estimate. Confirm the salary breakup, payroll treatment and tax position with the employer.
Why can two similar CTC figures have different take-home pay?
Employer contributions, deductions, variable pay and individual tax choices can all differ.