Gratuity calculator

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.