Gratuity Calculator — India
This gratuity calculator works out your gratuity under India’s new labour codes, in force since 21 November 2025: 15 days of wages for every year of service under the 15/26 formula, wages worked out under the new 50% rule — basic pay plus dearness allowance, with any allowances above half your total pay added back — and the new one-year eligibility for fixed-term employees, paid pro-rata.
- Formula
- 15 days per year (15/26)
- Wage basis
- At least 50% of total pay
- Permanent staff
- 5 years to qualify
- Fixed-term staff
- 1 year, pro-rata
- Maximum payable
- ₹20 lakh
Your job and salary
The one-year rule covers fixed-term staff engaged directly by the employer. If you work through a contractor or staffing agency, the contractor pays your gratuity after five years, like a permanent employee.
Your full monthly remuneration before deductions — basic, DA, HRA, and all other allowances combined (roughly your monthly CTC excluding the employer’s PF contribution). The new law counts any allowances above 50% of this figure as wages, so gratuity wages can never fall below half of it.
For permanent employees, a final part-year of more than six months counts as a full year; six months or less does not count. Fixed-term employees are paid pro-rata on the exact service.
New labour codes vs the old Gratuity Act
How this gratuity calculator works — your amount, step by step
Three steps. First, your wages are set under the Code on Wages: basic pay plus dearness allowance, topped up to half of your total pay if your allowances run above 50% of it. Second, your service is counted — completed years with the six-month rounding rule for permanent staff, exact pro-rata service for fixed-term staff. Third, the 15/26 formula is applied and the ₹20 lakh maximum is checked.
The gratuity formula — 15 days of wages for every year
One formula for every covered employee. Gratuity is 15 days of wages for each completed year of service, on your last drawn wages: gratuity = wages × 15 ÷ 26 × years of service. The 26 is the number of working days the law counts in a month, so 15/26 of a month’s wages is exactly 15 days of pay — a little over half a month’s wages for every year you worked. For seasonal establishments a different rate applies: seven days of wages for each season.
| Part of the formula | What it means | Value |
|---|---|---|
| Days of wages per year | What you earn for each year of service | 15 days |
| Working days in a month | The statutory month used to price a day | 26 days |
| Part-year over 6 months | Rounds up to a full year (permanent staff) | counts |
| Maximum payable | The statutory ceiling on the payment | ₹20,00,000 |
Worked example. On wages of ₹50,000 a month, each year of service earns 50,000 × 15 ÷ 26 = ₹28,846. Ten years of service therefore pays ₹2,88,462 — and because the amount is under the ₹20 lakh ceiling, it is also fully exempt from income tax for a covered private-sector employee.
What changed on 21 November 2025 — the new labour codes
The formula did not change. The salary it runs on, and who qualifies, did. The four labour codes replaced 29 older laws, and gratuity moved from the Payment of Gratuity Act, 1972 into the Code on Social Security, 2020. Two changes matter for your payout, and the Labour Ministry’s FAQs confirm that for anyone leaving on or after 21 November 2025, the new wage definition applies to the whole period of service — including years worked before the codes began.
| Rule | Old — Gratuity Act, 1972 | Now — Code on Social Security, 2020 |
|---|---|---|
| Salary base | Basic + DA, as the employer designated it — a low basic meant low gratuity | Wages: basic + DA + retaining allowance, and never less than 50% of total pay |
| Permanent employees | 5 years of continuous service | 5 years — unchanged |
| Fixed-term employees | Same 5-year wait | Eligible after 1 year, paid pro-rata |
| Death or disablement | No minimum service | No minimum service — unchanged |
| Formula | (Wages × 15 × years) ÷ 26 | Unchanged |
| Maximum payable | ₹20 lakh | ₹20 lakh — unchanged |
Why the 50% rule raises so many payouts. Many Indian salary structures keep basic pay at 30–40% of total pay and load the rest into HRA and allowances, which quietly shrank gratuity for decades. Under the Code on Wages, excluded components may not exceed half of total remuneration: anything above that is added back to wages. On total pay of ₹60,000 with basic + DA of ₹24,000, wages for gratuity are ₹30,000 — not ₹24,000 — and ten years of service pays ₹1,73,077 instead of ₹1,38,462.
Who qualifies for gratuity — the 5-year rule, the 1-year rule, and the exceptions
Permanent employees: five years of continuous service. The five-year test is about continuous service with the same employer, and a year counts as continuous when you actually worked at least 240 days in it (190 days for underground mines) — paid leave, sick leave and maternity leave all count toward it.
If your final part-year takes you past six months, it rounds up for the amount, which is why someone at 4 years 7 months is paid for 5 years. Some High Courts have gone further and treated four years plus 240 days actually worked in the fifth year as completing five years — but that reading is not applied uniformly, so if you are resigning close to the line, the exact date of your last working day is worth real money and worth checking with HR.
Fixed-term employees: one year, pro-rata. Since 21 November 2025, a fixed-term employee engaged directly by the employer qualifies after completing one year of service under the contract and is paid pro-rata for the exact period served — 2 years 6 months is paid as 2.5 years. An engagement of less than one year, such as an 11-month contract, does not qualify. Staff supplied through a contractor are in a different position: the contractor, as the employer, pays their gratuity after five years.
No wait at all on death or disablement. When employment ends because the employee dies or is disabled by accident or disease, gratuity is payable whatever the length of service — to the nominee, or to the legal heirs if there is no nomination. Gratuity can also be forfeited, but only narrowly: where the employee is terminated for proven misconduct causing damage, or an offence involving moral turpitude, and only to the extent the law allows.
Worked examples — gratuity in practice
Ten years, permanent, allowance-heavy salary. Priya’s total pay is ₹60,000 a month, but her basic + DA is only ₹24,000. Under the old Act her gratuity ran on ₹24,000: 24,000 × 15 ÷ 26 × 10 = ₹1,38,462. Under the new codes her wages are topped up to 50% of total pay — ₹30,000 — and the same ten years pay 30,000 × 15 ÷ 26 × 10 = ₹1,73,077. The 50% rule alone adds ₹34,615.
Two and a half years on a fixed-term contract. Rohan is hired directly on a fixed-term contract with wages of ₹40,000 a month (basic + DA of ₹40,000 within total pay of ₹60,000, so no top-up applies). Under the old rules he would have received nothing — he left before five years. Under the new codes he qualifies after one year and is paid pro-rata: 40,000 × 15 ÷ 26 × 2.5 = ₹57,692.
Thirty years, high earner — the ₹20 lakh ceiling. Meera retires after 30 years on wages of ₹1,50,000 a month. The formula gives 1,50,000 × 15 ÷ 26 × 30 = ₹25,96,154, but the statutory maximum is ₹20 lakh, so her gratuity is ₹20,00,000. Anything above the ceiling that an employer chooses to pay is ex-gratia, not statutory gratuity.
How we calculate — method and sources
This gratuity calculator follows the Code on Social Security, 2020 and the Code on Wages, 2019 step by step:
- Find the wages. Basic pay plus dearness allowance (and retaining allowance, if you receive one). Then the 50% test from Section 2(y) of the Code on Wages: if your excluded components — HRA, conveyance, overtime, bonus and similar — add up to more than half of your total remuneration, the excess is added back. Wages are therefore never less than 50% of total pay.
- Count the service. For permanent employees, completed years, with a final part-year of more than six months rounded up to a full year. For fixed-term employees, the exact service in years and months, paid pro-rata.
- Test eligibility. Five years of continuous service for permanent employees, one year for fixed-term employees engaged directly, and no minimum where employment ended due to death or disablement.
- Apply the formula. Gratuity = wages × 15 ÷ 26 × years counted, then the statutory maximum of ₹20,00,000 is applied.
- Compare with the old law. The comparison panel runs the same service on basic + DA alone, with the old five-year wait for every type of employee, so you can see exactly what the new codes changed for you.
The formula, eligibility rules and ceiling are taken from Section 53 of the Code on Social Security, 2020 (which carries forward Section 4 of the Payment of Gratuity Act, 1972), the wages definition in Section 2(y) of the Code on Wages, 2019, and the Labour Ministry’s published FAQs, including its clarification that the new wage definition applies to the entire service for exits on or after 21 November 2025. The tax exemption is Section 10(10) of the Income Tax Act. Figures were verified on 22 October 2026.
Gratuity calculator — common questions
How is gratuity calculated in India?
Gratuity = (last drawn monthly wages × 15 × years of service) ÷ 26. You earn 15 days of wages for every completed year of service, with a month counted as 26 working days. A final part-year of more than six months rounds up to a full year. The maximum gratuity payable is ₹20 lakh.
What changed for gratuity under the new labour codes?
Two things, from 21 November 2025. First, gratuity now runs on wages as defined in the Code on Wages: basic pay plus dearness allowance plus retaining allowance, and if your other allowances exceed 50% of your total pay, the excess is added back — so wages are never less than half your total pay. Second, fixed-term employees hired directly by the employer qualify after just one year, paid pro-rata. For anyone leaving on or after 21 November 2025, the new wage definition applies to their entire service.
Who is eligible for gratuity?
Permanent employees need five years of continuous service. Fixed-term employees engaged directly by the employer need only one year and are paid pro-rata for the service completed. There is no minimum service at all when employment ends because of death or disablement. Staff engaged through a contractor are paid by the contractor after five years.
Is gratuity taxable in India?
For private-sector employees covered by the law, gratuity is exempt from income tax up to ₹20 lakh over your lifetime under Section 10(10) of the Income Tax Act. Because the maximum gratuity payable is also ₹20 lakh, a covered employee’s statutory gratuity is normally fully tax-free. Government employees’ gratuity under the CCS (Pension) Rules is fully exempt and follows different rules.
How are part years counted for gratuity?
For permanent employees, only completed years count, but a final part-year of more than six months is rounded up to a full year: 7 years 7 months is paid as 8 years, while 7 years 4 months is paid as 7. Fixed-term employees are instead paid pro-rata on their exact service, so 2 years 6 months is paid as exactly 2.5 years.
When must my employer pay my gratuity?
Within 30 days of the gratuity becoming payable. If the employer pays late, simple interest is payable on the delayed amount for the period of delay. You claim with Form IV under the Code on Social Security (Central) Rules, 2026; under the old Act this was Form I.
More free calculators
Also on ToolNestCalc: the Saudi Arabia end of service calculator for EOSB gratuity under Articles 84 and 85, the Nigeria PAYE calculator for 2026 salary tax under the new Tax Act, the Pakistan salary tax calculator for FY 2026-27 take-home pay, the no tax on tips and overtime calculator for the 2025 US deductions, the AI token cost calculator for API pricing, or browse all our free online calculators.