Labour Law
Gratuity Eligibility and Calculation Under the Payment of Gratuity Act
2026-03-08 · 7 min
Gratuity is a statutory retirement benefit for employees completing 5+ years of continuous service. Here's how the math works and what employers should provision.
Eligibility
Continuous service of 5 years (relaxed in case of death or disablement) in any establishment with 10+ employees.
Formula
Gratuity = (Last drawn basic + DA) × 15/26 × completed years of service.
Cap and tax
Statutory cap is ₹20 lakh; tax exemption follows Section 10(10) of the Income Tax Act.
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