Gratuity Tax Exemption Calculator – Section 10(10)

Gratuity Tax Exemption Calculator for FY 2026–27

Use this free gratuity tax exemption calculator to estimate tax-free gratuity and taxable gratuity for Tax Year 2026–27. It applies the current Section 19 rules for eligible government employees, employees covered by the Payment of Gratuity Act and other employees.

Gratuity Tax Exemption Calculator

Estimate tax-free gratuity under Section 19 of the Income-tax Act, 2025 for Tax Year 2026–27.

Last drawn monthly Basic + DA (₹)Exclude bonus, commission, HRA, overtime, allowances, benefits and perquisites

Completed years of serviceEnter whole completed years only

Additional completed months0 to 11 months; only more than 6 counts as another year

Gratuity received (₹)Enter the gross gratuity from this employer

Estimated Tax-Free Gratuity

₹0

Current provision—

Formula amount₹0

Applicable limit₹20,00,000

Gratuity received₹0

Service counted—

Estimated taxable gratuity₹0

The result is an educational estimate. Confirm employee category, eligible salary and prior deductions with payroll records.

Reviewed on July 13, 2026 using the Income-tax Act, 2025 as amended by the Finance Act, 2026, the Payment of Gratuity Act, 1972 and official Income Tax Department guidance.

For tax years beginning on or after 1 April 2026, gratuity deductions from salary are governed by Section 19 of the Income-tax Act, 2025. The familiar Section 10(10) belongs to the repealed 1961 Act, although it remains a common search term. Section 19 separates government death-cum-retirement gratuity, gratuity covered by the Payment of Gratuity Act and other gratuity into different table entries.

Quick answer: Eligible government death-cum-retirement gratuity is fully deductible. For an employee covered by the Payment of Gratuity Act, the tax-free amount is normally the least of actual gratuity, the statutory formula and ₹20 lakh. For another eligible employee, it is the least of actual gratuity, half a month's average eligible salary for each completed year and the remaining notified limit.

How to use the gratuity exemption calculator

1. Select the correct employee category.
2. For a covered employee, enter last drawn monthly Basic plus DA, completed years and additional completed months.
3. For a not-covered employee, enter the eligible average monthly salary for the 10 months before the event and whole completed years.
4. Enter gratuity received from the current employer.
5. If you are not covered, enter any gratuity deduction or exemption already allowed in earlier tax years.
6. Review the formula, applicable limit, service counted and estimated taxable gratuity.

Gratuity tax rules for Tax Year 2026–27

Employee category	Current provision	Maximum deductible amount	Service treatment
Qualifying Central or State Government or local-authority employee	Section 19(1), Table serial number 3	Entire eligible death-cum-retirement gratuity	No formula required
Employee covered by the Payment of Gratuity Act	Section 19(1), Table serial number 5	Least of actual receipt, statutory formula and ₹20 lakh	A part in excess of 6 months counts as a year
Other eligible employee not covered by that Act	Section 19(1), Table serial number 6	Least of actual receipt, formula and remaining notified limit	Only completed years count

Choose the government category carefully: Official guidance treats qualifying government employees as fully exempt but expressly excludes employees of statutory corporations from that government category. A public-sector or statutory body name alone does not prove full exemption.

Formula for an employee covered by the Gratuity Act

Formula amount = 15 / 26 × last drawn eligible monthly salary × counted years

The deduction is restricted to the least of the formula amount, gratuity actually received and the current ₹20 lakh statutory ceiling. Official tax guidance describes salary for this formula as last drawn salary including dearness allowance, while excluding bonus, commission, HRA, overtime and other allowances, benefits or perquisites.

A fraction of service counts as one additional year only when it is more than six months. Therefore, 12 years and 6 months counts as 12 years, while 12 years and 7 months counts as 13 years. The calculator uses separate years and months fields so this rule is not distorted by decimal-year rounding.

Formula for an employee not covered by the Gratuity Act

Formula amount = 1 / 2 × average eligible monthly salary × completed years

Average salary is based on the 10 months immediately preceding the month of retirement, incapacity or termination. For Section 19 Table serial number 6, salary includes dearness allowance only when the terms of employment provide for it and excludes other allowances and perquisites. Fractions of a year are ignored.

If gratuity deductions were allowed in earlier tax years, Section 19(2)(a) reduces the notified aggregate limit by those earlier allowed amounts. The calculator therefore asks this category for prior gratuity deduction or exemption used.

Example: covered employee

Assume last drawn Basic plus DA is ₹60,000, service is 12 years and 7 months, and gratuity received is ₹5,00,000.

• Counted service: 13 years.
• Formula amount: 15 / 26 × ₹60,000 × 13 = ₹4,50,000.
• Actual gratuity: ₹5,00,000.
• Statutory ceiling: ₹20,00,000.
• Estimated tax-free gratuity: ₹4,50,000; estimated taxable gratuity: ₹50,000.

Example: employee not covered by the Gratuity Act

Assume the eligible 10-month average salary is ₹60,000, completed service is 12 years, gratuity received is ₹5,00,000 and no earlier gratuity deduction was used. The formula amount is 1 / 2 × ₹60,000 × 12 = ₹3,60,000. Estimated tax-free gratuity is therefore ₹3,60,000 and estimated taxable gratuity is ₹1,40,000.

Does the ₹20 lakh limit reset for a new employer?

For Section 19 Table serial number 6, it does not simply reset. Where gratuity deductions were allowed in earlier tax years, the current aggregate deduction cannot exceed the notified limit reduced by the earlier allowed amount. If ₹19 lakh was already allowed, only ₹1 lakh of the current ₹20 lakh notified limit remains, subject also to the current receipt and formula.

When this calculator should not be used alone

• Gratuity paid during continuing service can be taxable; verify whether the payment falls within an eligible event.
• Seasonal-establishment employees can use a seven-day formula instead of 15 days; this tool does not calculate that variation.
• Piece-rated wages, commission structures, overseas employment and non-standard service records require a separate review.
• The tool estimates tax deduction, not whether an employee has completed the employment-law conditions to receive gratuity.
• Employer records and the actual gratuity order prevail over this estimate.

Gratuity deduction and tax regime choice

Section 19 lists gratuity deductions separately from the standard-deduction entry that distinguishes Section 202(1) computation. The calculator therefore applies the same gratuity category formula regardless of the user's broader rate-regime choice. Other salary deductions and the tax payable on any taxable balance can still differ.

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Frequently asked questions

What is the gratuity tax exemption limit in FY 2026–27?

For a non-government employee, official guidance uses a maximum ceiling of ₹20 lakh, subject to the employee category, formula and actual gratuity received. Qualifying government death-cum-retirement gratuity is fully deductible.

Which current section covers gratuity exemption?

For tax years beginning from 1 April 2026, gratuity deductions from salary are in Section 19 of the Income-tax Act, 2025. Section 10(10) is the corresponding provision under the repealed Income-tax Act, 1961.

Is gratuity fully tax-free for every government-company employee?

No. Full deduction applies to the qualifying government and local-authority category described in Section 19. Official guidance excludes statutory-corporation employees from the government category, so the legal nature of the employer must be checked.

How are 6 additional months of service treated?

For a covered employee, only a part of a year in excess of six months counts as another year. Exactly 6 months does not count; 7 months does. For the not-covered formula, only completed years count.

What salary should a covered employee enter?

Enter last drawn monthly Basic plus DA used for the statutory formula. Do not include bonus, commission, HRA, overtime, other allowances, benefits or perquisites in this calculator.

What salary should a not-covered employee enter?

Enter the average eligible monthly salary for the 10 months immediately before the month of retirement, incapacity or termination. Include DA only when the employment terms provide for it and exclude other allowances and perquisites.

Does an earlier gratuity exemption reduce the current limit?

For Section 19 Table serial number 6, yes. Earlier gratuity amounts allowed as an exemption or deduction reduce the notified aggregate limit available for the current tax year.

Is gratuity received while still employed tax-free?

Do not assume so. The current provisions identify specified retirement, incapacity or termination-related receipts. A payment during continuing service should be reviewed separately and may be taxable.

Does the calculator include seasonal establishments?

No. Official guidance uses seven days instead of 15 days for a covered employee of a seasonal establishment, so that case needs a separate calculation.

Does the calculator determine gratuity eligibility?

No. It estimates the income-tax deduction after a gratuity amount is received. Employment-law eligibility, continuous service, death or disability exceptions and employer disputes must be checked separately.

Official sources

• Income Tax Department – Section 19, deductions from salaries
• CBDT – Income-tax Act, 2025 as amended by Finance Act, 2026
• Income Tax Department – gratuity threshold limits and formulas
• Income Tax Department – effective ₹20 lakh gratuity limits
• Income Tax Department – employee gratuity categories and salary definitions

Disclaimer: This calculator provides an educational estimate and is not tax, legal, employment or filing advice. The result can change with employee status, employer type, eligible salary, service records, payment timing, previous deductions and special gratuity rules. Verify the gratuity order and official guidance or consult a qualified tax professional before filing.