Payroll · Gratuity
Central Government Gratuity Calculator (India, 2026)
Gratuity is a lump sum an employer pays for long service, and how it is calculated depends on who you work for. A central government employee is covered by the CCS (Pension) Rules, a private employee is covered by the Payment of Gratuity Act, and an LIC agent has a separate scheme, so the "calculator" is not one formula. This guide explains each method, the maximum ceiling, how gratuity is taxed, and what to check before you trust any online calculator.
- No single formula: central government, private employees and LIC agents each use a different method.
- Central government: one-fourth of emoluments per completed six-monthly period, with a ceiling, plus death gratuity.
- Private (Gratuity Act): last drawn salary x 15/26 x completed years of service, generally after five years.
- LIC agents: a separate scheme based on commission and years of agency, not the salary formula.
- Ceiling: a statutory maximum applies and is revised from time to time (confirm the current figure).
- Tax: fully exempt for government employees; exempt up to limits under section 10(10) for others.
01What gratuity is
Gratuity is a one-time payment an employer makes to an employee as a reward for long service, usually paid on retirement, resignation after a qualifying period, or death or disablement. It is separate from salary, provident fund and pension.
The rules that apply depend on the employer:
- Central government employees: the Central Civil Services (Pension) Rules.
- Private and most other employees: the Payment of Gratuity Act 1972.
- LIC agents: a separate gratuity scheme for agents.
There is no single gratuity calculator
An online "central government gratuity calculator" uses the CCS Pension Rules method, which is not the same as the Payment of Gratuity Act formula most private calculators use. Use the one that matches your employer.
02Central government formula
For a central government employee, the main retirement benefit of this kind is the retirement gratuity under the CCS (Pension) Rules. The common method is:
- One-fourth of emoluments (basic pay plus dearness allowance) for each completed six-monthly period of qualifying service.
- Subject to a maximum number of such periods and an overall ceiling.
There is also a death gratuity payable to the family if an employee dies in service, calculated on a graded scale by length of service, which can be higher in the early years of service.
Because the emoluments, the number of periods and the ceiling all feed in, a central government calculator needs your exact last-drawn basic plus DA and your qualifying service in half-year units.
03Private employee formula
For employees covered by the Payment of Gratuity Act 1972 (most private sector establishments with 10 or more employees), the formula is:
| Element | Value |
|---|---|
| Formula | Last drawn salary x 15/26 x number of completed years of service |
| Salary | Basic pay plus dearness allowance |
| 15/26 | 15 days of wages for each year, on a 26-day month |
| Rounding of service | Service beyond six months in the final year is usually rounded up to a full year |
Gratuity under the Act is generally payable after five years of continuous service, except on death or disablement, where the five-year condition does not apply. The amount is also subject to a statutory maximum ceiling, which is revised from time to time.
04LIC agent gratuity
LIC agents are not salaried employees, so they are not covered by the Payment of Gratuity Act in the same way. They have a separate gratuity scheme for agents, based on the commission earned and the length of agency.
An "LIC agent gratuity calculator" therefore uses the agent scheme rules, typically looking at renewal commission over a qualifying period and years of agency, not the 15/26 salary formula. Check the current scheme terms, because the eligibility and the method are specific to the agent scheme and differ from employee gratuity.
05How gratuity is taxed
Gratuity is taxed under section 10(10) of the Income-tax Act, and the exemption depends on the type of employee:
- Government employees: gratuity received is fully exempt from income tax.
- Employees covered by the Payment of Gratuity Act: exempt up to the least of the statutory ceiling, the actual gratuity received, or the amount worked out by the 15/26 formula.
- Other employees: a separate half-month-average-salary formula applies, up to the ceiling.
So a central government retiree usually pays no tax on gratuity, while a private employee may have part of a very large gratuity taxed above the ceiling. For related payroll registrations, see EPF mobile number registration and ESIC registration fees.
06How Claw Tax helps
Claw Tax and Accounts is an online tax, GST and accounting service for India that connects you with a verified chartered accountant at a fixed, published price, with a Claw reviewer checking every filing before it is submitted.
Working out gratuity and its exemption is simple when the numbers are clean, and you can compute it yourself. It gets fiddly when a large gratuity is partly taxable, when you are an employer running payroll and need to provide for gratuity correctly, or when PF and ESI have to line up with it. With Claw Tax and Accounts, a verified chartered accountant handles salaried returns, the gratuity exemption and employer PF and ESI compliance at a fixed, published price, a Claw reviewer checks each filing, and reminders go out before due dates.
This is an online service, and it is not tax advice; a verified CA handles your specifics.
07Frequently asked questions
How is central government gratuity calculated?
For a central government employee, retirement gratuity under the CCS (Pension) Rules is commonly one-fourth of emoluments (basic pay plus dearness allowance) for each completed six-monthly period of qualifying service, subject to a maximum number of periods and an overall ceiling. There is also a death gratuity on a graded scale if the employee dies in service. Confirm the current formula and ceiling on doppw.gov.in.
Is the central government gratuity formula the same as for private employees?
No. Central government gratuity uses the CCS (Pension) Rules method based on emoluments and six-monthly periods. Private employees covered by the Payment of Gratuity Act use last drawn salary times 15/26 times completed years of service, generally payable after five years. That is why a "central government gratuity calculator" and a private-sector one give different results; use the one that matches your employer.
What is the gratuity formula under the Payment of Gratuity Act?
It is last drawn salary (basic plus dearness allowance) multiplied by 15/26 multiplied by the number of completed years of service. The 15/26 reflects 15 days of wages for each year on a 26-day month, and service beyond six months in the final year is usually rounded up to a full year. Gratuity is generally payable after five years of continuous service, except on death or disablement.
How is LIC agent gratuity calculated?
LIC agents are not salaried employees, so they fall under a separate agent gratuity scheme rather than the Payment of Gratuity Act. The calculation typically looks at renewal commission over a qualifying period and the length of agency, not the 15/26 salary formula. Because the eligibility and method are specific to the agent scheme, confirm the current terms from LIC before relying on any online figure.
Is gratuity taxable?
It depends on the employee. Gratuity received by a government employee is fully exempt from income tax under section 10(10). For employees covered by the Payment of Gratuity Act, it is exempt up to the least of the statutory ceiling, the actual amount received, or the 15/26 formula amount, with the balance taxable. Other employees use a half-month-average-salary formula up to the ceiling.
What is the maximum gratuity amount?
Gratuity under the Payment of Gratuity Act is subject to a statutory maximum ceiling, which the government revises from time to time. Amounts up to the ceiling can qualify for tax exemption within the section 10(10) limits, and a very large gratuity above the ceiling may be partly taxable for a private employee. Confirm the current ceiling on labour.gov.in before relying on a figure.