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Gratuity Calculator

Enter your last monthly basic pay and DA and your years of service. Since 21 November 2025 gratuity follows the Code on Social Security: the formula is unchanged, but fixed-term employees now qualify after one year, and the rule that basic pay must be at least half of total pay raises the amount for many people.

Not your gross or CTC — basic pay plus dearness allowance

Employment
Employer covered by the Social Security Code?

Establishments with 10 or more employees are

Enter your last monthly basic pay and years of service to see your gratuity.

How to use this tool

  1. Enter your last drawn monthly wages — basic pay plus dearness allowance, not your gross salary or CTC.
  2. Enter your continuous service in years and extra months.
  3. Choose permanent or fixed-term employment. Permanent employees need five years of service; fixed-term employees qualify after one.
  4. Say whether your employer is covered by the Code. Establishments with ten or more employees are; smaller ones may follow a different basis.
  5. Read the gratuity, the tax-free part and anything taxable above ₹20 lakh.

Formula and method

Employers covered by the Code

Gratuity = last monthly wages × 15 × years ÷ 26
15
— days of wages for each year of service
26
— working days in a month
years
— completed years, plus one if the last part-year is more than six months

15 ÷ 26 of a month's pay is about 58% of one month's wages for every year worked.

Employers outside the Code

Gratuity = last monthly wages × 15 × completed years ÷ 30

Half a month's pay for each completed year, with no rounding up of part-years.

Worked examples

₹40,000 basic + DA, 10 years of service

  1. 40,000 × 15 × 10 ÷ 26 = ₹2,30,769

₹2,30,769, all of it tax-free.

The same salary, 10 years and 7 months

  1. 7 months is more than six, so the part-year counts as a full year
  2. 40,000 × 15 × 11 ÷ 26 = ₹2,53,846

₹2,53,846 — one extra month of service adds about ₹23,000.

Fixed-term contract, ₹40,000, one year

  1. 40,000 × 15 × 1 ÷ 26 = ₹23,077

₹23,077 — before the Code, this employee would have received nothing.

Notes and limitations

  • “Wages” for gratuity are basic pay, dearness allowance and retaining allowance. Under the Labour Codes, if allowances such as HRA exceed half of total pay, the excess is added back to wages, which can raise gratuity above what the salary slip suggests.
  • Permanent employees need five years of continuous service, except on death or disablement, when there is no minimum. Courts have sometimes counted a little under five years as five; this calculator uses the plain rule.
  • The employer's legal obligation is capped at ₹20 lakh. For private-sector employees, gratuity up to ₹20 lakh is tax-free over a working life and anything above it is taxed as salary.
  • Government employees are paid under their own service rules, with a different formula and ceiling, and their gratuity is fully tax-free. Use your department's rules rather than this calculator.

Frequently asked questions

What changed for gratuity under the new Labour Codes?

From 21 November 2025, the Code on Social Security, 2020 replaced the Payment of Gratuity Act. The 15 ÷ 26 formula is the same, but fixed-term employees now qualify after one year instead of five, and the definition of wages means allowances above half of total pay count towards gratuity.

Is gratuity calculated on gross salary or basic?

On basic pay plus dearness allowance — not gross salary, not CTC. That is why the rule that basic must be at least half of total pay tends to increase gratuity.

How much service do I need to get gratuity?

Five years of continuous service for a permanent employee and one year for a fixed-term employee. On death or disablement, gratuity is payable regardless of length of service.

Is gratuity taxable?

For private-sector employees, gratuity up to ₹20 lakh is exempt and anything above is taxable as salary. The ₹20 lakh limit applies across your whole career, not per employer.

When must the employer pay gratuity?

Within 30 days of it becoming payable, usually when you leave. Late payment carries interest.

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