Gratuity calculator

What your gratuity comes to, on the rules that changed in November 2025.

  • The 15 ÷ 26 formula
  • One year for fixed-term staff
  • The new meaning of wages
  • What is taxable

The last basic and DA were a month, for , with of service, so the gratuity is

The gratuity

₹1,61,538

Fifteen days of wages for each of 7 years

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What it is worth at each year of service

Gratuity

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Facts checked 14 Nov 2026Your numbers stay on your deviceIndian rules, amounts in rupees

Please note. The formula and the limits come from the Code on Social Security 2020, which replaced the Payment of Gratuity Act 1972 on 21 November 2025. Your employer may pay more than the law asks; nothing here is legal or tax advice.

Facts checked 14 Nov 2026Your numbers stay on your deviceIndian rules, amounts in rupees

Please note. The formula and the limits come from the Code on Social Security 2020, which replaced the Payment of Gratuity Act 1972 on 21 November 2025. Your employer may pay more than the law asks; nothing here is legal or tax advice.

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What moves it most

1 of 2
  • If your allowances are more than half of all your pay, the excess is added back to wages for gratuity. That has been the rule since 21 November 2025.

What staying longer is worth

On the same wages, with the years the law would count.

  1. 15 years moreMost12 years of service₹2.8 lakh
  2. 23 years more10 years of service₹2.3 lakh
  3. 3One year more8 years of service₹1.8 lakh
  4. 4Leaving nowYours7 years of service₹1.6 lakh

Each whole year adds fifteen days of wages, until the ₹20 lakh ceiling.

Gratuity calculator

What your gratuity comes to, on the rules that changed in November 2025.

The gratuity ₹1,61,538

On a last basic and DA of ₹40,000 a month and 7 years counted, the gratuity comes to ₹1,61,538.

Wages a day
₹1,538
Fifteen days of wages
₹23,077
Years counted
7 years
The most the law asks
₹20,00,000

Guide

What this tool is for

It works out the gratuity an employer owes when you leave: fifteen days of wages for every year of service, on the rules that replaced the Payment of Gratuity Act 1972 in November 2025. It tells you whether you have served long enough to be paid at all, how the part year counts, where the ₹20 lakh ceiling falls, and how much of it is taxed.

Who it's for: anyone about to resign or retire who wants to check the figure in their settlement letter; people on fixed-term contracts, who now qualify after one year instead of five; and families claiming after a death, where there is no waiting period at all.

What gratuity is

Gratuity is the lump sum an employer pays you for staying. It is not a bonus and not a part of your salary you can ask for every month: it is a payment the law makes due when you leave, and the amount follows one short formula.

The formula

Fifteen days of wages for every completed year of service. For anyone paid monthly, the law says a day's wages means your monthly wages divided by 26, not 30. So the whole sum is:

> last basic and DA ÷ 26 × 15 × years of service

Take Murugan, a supervisor at a workshop in Kallakurichi. His last basic and dearness allowance came to ₹40,000 a month and he had been there seven years. His daily wages are ₹40,000 ÷ 26 = ₹1,538. Fifteen of those is ₹23,077, and over seven years that is ₹1,61,538.

The 26 matters. Divide by 30 instead and the same seven years would come to ₹1,40,000, about ₹21,500 less. The 26 is there because it assumes four weekly offs a month, and it is the figure written into the Code.

The part year

A part year over six months counts as a whole year. Six months or fewer counts as nothing at all.

That makes the last few months before you resign worth money. Ten years and seven months counts as eleven years. Ten years and six months counts as ten. On Murugan's wages, a single month either side of that line is worth ₹23,077.

How long you have to stay

This is where the ground moved. On 21 November 2025 the four labour codes came into force and the Payment of Gratuity Act 1972 was replaced by the Code on Social Security 2020. Almost every calculator online still quotes the 1972 Act.

For permanent staff the five-year rule is unchanged. Below five years of continuous service, nothing is payable, and it really is all or nothing.

For fixed-term staff it changed completely. The Code says gratuity is paid pro rata when a fixed-term contract ends, and the Labour Ministry's own FAQ of 16 March 2026 says a fixed-term employee is eligible after one year of service, counted from the start of the contract. The ministry gave the same answer about an eleven-month contract. If you are on a contract that keeps being renewed, you are earning gratuity from year one.

There is no waiting period at all when service ends in death or disablement. The gratuity goes to the nominee, or to the heirs where no one was named.

What counts as a year

A year of continuous service is not simply twelve months on the rolls. Where service is broken, the Code says a year counts if you actually worked 240 days in the twelve months before, or 190 days if you work underground in a mine or your establishment runs fewer than six days a week. Paid leave, layoff, time off after a workplace injury and up to 26 weeks of maternity leave all count as days worked.

This is the answer to the question people really ask: does four years and 240 days count as five? Under the law as written, no. The 240-day test decides whether a broken year counts as a year, not whether four years and a bit become five. Some High Courts have read it the other way for the fifth year, but it is not settled, and an employer is within the law to refuse.

The new meaning of wages

The quieter change is worth more money to most people. From 21 November 2025 the codes use one definition of wages, and it carries a floor: if your allowances come to more than half of all your pay, the excess is added back to wages.

The Labour Ministry's own worked example takes someone on ₹76,000 a month with only ₹20,000 of basic and DA. Allowances are ₹40,000, half of all pay is ₹38,000, so ₹2,000 is added back and statutory sums run on wages of ₹22,000, not ₹20,000. On ten years that lifts the gratuity from ₹1,15,385 to ₹1,26,923.

Indian salary structures usually keep basic low and allowances high, so this rule raises gratuity for a great many people. The switch in the tool works it out on your own numbers.

The ceiling, and the tax

The most the law requires is ₹20 lakh. An employer may pay more, and some do, but nothing above that is a legal claim.

Tax follows a separate least-of-three rule. For employees covered by the gratuity law, the tax-free part is the smallest of: the formula amount, ₹20 lakh, and what you are actually paid. Anything your employer pays over that is added to your salary income and taxed at your slab.

If your employer has fewer than ten employees, the gratuity law does not apply at all. Many such employers still pay, usually at half a month's pay for each completed year with no rounding up, and the income tax rules give that case its own exemption working.

Before you resign

Three things are worth checking while you still can. Your joining date and last working day, because they decide the years counted. Your basic and DA, because the whole sum runs on them and not on your CTC. And the months, because seven months is a year and six is nothing.

Sources

Facts checked 14 Nov 2026
  1. COSSSection 53, Payment of gratuity, Code on Social Security 2020 · Government of India2025

    Gratuity at fifteen days' wages for every completed year of service or part in excess of six months, on last drawn wages; five years of continuous service not needed on death, disablement or the end of a fixed-term contract; seven days' wages a season for seasonal work; fixed-term and deceased emplo in force 21 Nov 2025

  2. MOLEAdditional FAQs on Labour Codes, as on 16 March 2026 · Ministry of Labour and Employment2026

    A fixed-term employee is eligible for gratuity after one year of service from the start of the contract; the revised meaning of wages applies to gratuity from 21 November 2025. 16 Mar 2026

  3. MOLEFAQs on Labour Codes, with the worked example of the 50% rule · Ministry of Labour and Employment2025

    Where allowances other than gratuity and retrenchment compensation are more than half of all pay, the excess is added back to wages; the ministry's own example takes ₹76,000 of pay with ₹20,000 of basic and DA to wages of ₹22,000. The ceiling on gratuity is ₹20 lakh. 30 Dec 2025

  4. COSSSection 54, Continuous service, Code on Social Security 2020 · Government of India2025

    A year counts when the employee actually worked 240 days in the twelve months before, or 190 days underground in a mine or where the establishment works fewer than six days a week; paid leave, layoff, injury and up to 26 weeks of maternity leave count as days worked. in force 21 Nov 2025

  5. ITDRetirement benefits: taxability of gratuity · Income Tax Department, Government of India2026

    For employees covered by the gratuity law, the exemption is the least of the formula amount, ₹20 lakh and the gratuity actually received; for those not covered, half a month's average salary for each completed year, ₹20 lakh, or the amount received. checked 14 Nov 2026

FAQs

What is the gratuity formula?

Last basic and dearness allowance divided by 26, multiplied by 15, multiplied by the years of service. The 26 is in the Code for monthly-rated employees; it assumes four weekly offs a month. A part year over six months counts as a whole year.

Do I get gratuity after four years and 240 days?

Not as the law is written. The 240-day test in the Code decides whether a broken year counts as a full year of continuous service. It does not turn four years and part of a fifth into five years. Some High Courts have allowed it, but it is not settled law and an employer may refuse.

Has the gratuity rule changed in 2026?

Yes. The Payment of Gratuity Act 1972 was replaced by the Code on Social Security 2020 on 21 November 2025. The formula and the ₹20 lakh ceiling are unchanged, but fixed-term staff now qualify after one year instead of five, and allowances above half of all pay are added back to the wages the gratuity runs on.

Do contract or fixed-term employees get gratuity?

Fixed-term employees engaged directly by the employer do, after one year counted from the start of the contract, paid pro rata. The Labour Ministry confirmed this in its FAQ of 16 March 2026. Workers supplied through a contractor are treated differently and are not covered by that answer.

Is gratuity taxable?

The tax-free part is the least of the formula amount, ₹20 lakh and what you are actually paid. If your employer pays more than that, the excess is added to your salary income and taxed at your slab rate.

Is gratuity paid on basic or on CTC?

On basic plus dearness allowance, not on CTC. Since 21 November 2025 there is one addition: where your allowances come to more than half of all your pay, the excess is added back to the wages the gratuity runs on.

What if my company has fewer than ten employees?

The gratuity law does not apply, so nothing is legally due. Many small employers still pay, commonly at half a month's pay for each completed year. The income tax rules recognise that case and give it its own exemption working.

When should gratuity be paid?

It becomes payable when your employment ends: on resignation, retirement, the end of a fixed-term contract, death or disablement. Apply to your employer in writing and keep a copy. Rules under the Code are still being notified, so ask your employer for their own timeline in writing.