Guide to Gratuity Calculation Rules in India (2026)

Gratuity is a financial benefit given by an employer to an employee for services rendered. It is governed by the Payment of Gratuity Act, 1972, and is paid upon resignation, retirement, or termination after completing a minimum period of continuous service.

1. Eligibility Requirements

• The employee must have completed 5 years of continuous service with the same employer.
• The company must have 10 or more employees on any day of the preceding 12 months.

2. Gratuity Calculation Formula

For employees covered under the Gratuity Act, the formula is:

Here, *Salary* includes Basic Pay + Dearness Allowance (DA). Commissions, HRA, and special allowances are excluded.