Gratuity Calculation Formula

Under the **Payment of Gratuity Act, 1972**, employees who complete at least 5 continuous years of service are entitled to gratuity.

Formula for Covered Establishments: $$\text{Gratuity} = \frac{15 \times \text{Last Drawn Basic Salary + DA} \times \text{Years of Service}}{26}$$

4 Years 240 Days Rule According to court rulings, if an employee has worked for **4 years and 240 days** (in a 6-day week setup) or **4 years and 190 days** (in a 5-day week setup), they are deemed to have completed 5 years of continuous service and are eligible for gratuity.

Tax Exemption Limit Gratuity received up to **₹20,00,000 (₹20 Lakh)** is **100% tax-free** under Section 10(10) for non-government private employees.