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Gratuity Rules India 2026 Eligibility, Formula, Tax, Maximum Limit

Complete gratuity guide India 2026. 5-year eligibility, formula: (Basic+DA × Years × 15/26), ₹20 lakh tax-free maximum, what happens if employer refuses to pay.

Gratuity Eligibility Rules 2026

Minimum 5 years continuous service with same employer
Payable on: retirement, resignation after 5yr, death, permanent disability
Death/disability: gratuity paid regardless of service duration
5-day work week companies: 4 years 240 days = 5 years (counts as complete year)
Applicable to companies with 10+ employees

Gratuity Formula

Gratuity = (Last Basic + DA) × Years of Service × 15/26

15 = 15 days salary per year of service | 26 = working days in a month (excluding Sundays)

Gratuity Calculations — IT Professionals 2026

Monthly Basic+DA	5 Years	10 Years	15 Years	20 Years
₹50,000	₹1,44,231	₹2,88,462	₹4,32,692	₹5,76,923
₹1,00,000	₹2,88,462	₹5,76,923	₹8,65,385	₹11,53,846
₹2,00,000	₹5,76,923	₹11,53,846	₹17,30,769	₹23,07,692
₹3,00,000	₹8,65,385	₹17,30,769	₹25,96,154	₹34,61,538

Gratuity Tax Rules 2026

Employee Type	Tax Exemption
Government employees (Central/State)	Fully exempt — no upper limit
Private sector (under Gratuity Act)	Up to ₹20 lakh tax-free
Private sector (not under Gratuity Act)	Up to ₹10 lakh tax-free

What If Employer Refuses to Pay Gratuity?

Send written notice to employer (registered post)
File complaint with Controlling Authority (Labour Commissioner) in your district
Authority issues payment order within 60 days
Delayed payment: employer pays 10% p.a. interest on gratuity amount
Willful refusal: imprisonment up to 2 years + fine

FAQs

Do I lose gratuity if I resign before 5 years? +

Yes, no gratuity if you resign before completing 5 years with same employer. Each employer counted separately — 3 years at Company A + 3 years at Company B = no gratuity from either (unless both are same group company). Death or permanent disability: gratuity paid even before 5 years.

Is gratuity part of CTC? +

Many companies include gratuity provision in CTC: Gratuity provision = Basic × 4.81% (15/26 × 1/12). If your CTC shows gratuity ₹25,000/year, your annual basic = approximately ₹5,20,000. This is a "notional" cost to employer — you actually receive it only after 5 years of service upon leaving.