Gratuity is a lump-sum payment from your employer for long service, usually paid when you leave after at least 5 years. It is one of the few 'thank you' payments in Indian employment law — and it is tax-free up to ₹20 lakh.
The formula
For employees covered by the Payment of Gratuity Act: (15/26) × last drawn monthly salary (Basic + DA) × completed years of service. A part-year over 6 months often counts as a full year.
Job-hopping cost
Leave before 5 continuous years and you generally get nothing (except death/disability cases). Switching every 2–3 years means you rarely collect gratuity — factor that into total compensation, not just CTC.