A reward for long service
Gratuity is a lump sum paid for continuous service of 5 years or more. The formula is (15 × last salary × years) ÷ 26, where salary means basic plus dearness allowance and any period beyond 6 months rounds up to a full year. For covered employees it is tax-free up to ₹20 lakh.
Common questions
After 5 years of continuous service with an employer (with some exceptions for death or disability).
(15 × last drawn salary × years of service) ÷ 26, where salary is basic + dearness allowance. A period over 6 months counts as a full year.
Gratuity up to ₹20 lakh is tax-free for non-government employees covered by the Payment of Gratuity Act.