How to use the gratuity calculator
- Enter your last drawn monthly basic pay plus dearness allowance.
- Enter your completed years of service and any extra months.
- Choose whether your employer is covered by the gratuity law and whether you are permanent or on a fixed-term contract.
- Optionally enter your total monthly pay to apply the labour code 50% wage rule.
- Read your gratuity, the tax-free part and the tax on the rest at your slab.
Gratuity formula
Gratuity = 15 × wages × years ÷ 26
Wages are your last drawn monthly basic pay plus dearness allowance. 15 days' wages are paid for each year, and a month is taken as 26 working days. Service of more than six months in the last year counts as a full year. For employers not covered by the law, the tax-free amount uses 15 ÷ 30 and completed years only.
Example: on ₹60,000 a month after 12 years 7 months, a covered employee gets ₹4,50,000 (13 years counted). With the 15/30 formula and completed years only, it is ₹3,60,000.
Gratuity by salary and service
| Basic + DA a month | 5 years | 10 years | 20 years | 30 years |
|---|---|---|---|---|
| ₹20,000 | ₹57,692 | ₹1,15,385 | ₹2,30,769 | ₹3,46,154 |
| ₹40,000 | ₹1,15,385 | ₹2,30,769 | ₹4,61,538 | ₹6,92,308 |
| ₹60,000 | ₹1,73,077 | ₹3,46,154 | ₹6,92,308 | ₹10,38,462 |
| ₹1,00,000 | ₹2,88,462 | ₹5,76,923 | ₹11,53,846 | ₹17,30,769 |
| ₹1,50,000 | ₹4,32,692 | ₹8,65,385 | ₹17,30,769 | ₹20,00,000 |
Figures stop at ₹20 L, the maximum gratuity under the law.
New labour code rules from November 2025
The four labour codes came into force on 21 November 2025. For gratuity, the Code on Social Security, 2020 (Section 53) replaced the Payment of Gratuity Act, 1972 and changed two things:
- Fixed-term employees qualify after one year of continuous service instead of five.
- The 50% wage rule: excluded pay such as HRA and conveyance may not be more than half your total pay. If it is, the excess counts as wages for gratuity.
Example: basic pay of ₹40,000 on a total pay of ₹1,00,000 a month. Wages for gratuity rise to ₹50,000, so 10 years of gratuity goes from ₹2,30,769 to ₹2,88,462.
Tax on gratuity
| Employee | Tax-free gratuity |
|---|---|
| Government | Fully exempt |
| Private, covered by the law | Lowest of gratuity received, the formula amount and ₹20 L |
| Private, not covered | Lowest of gratuity received, ½ month's average salary × completed years and ₹20 L |
The ₹20 L is a lifetime limit across employers, under Section 19 and Schedule II of the Income-tax Act, 2025 (earlier Section 10(10)). The exemption applies in both tax regimes. Anything over it is added to your salary; check the total on the income tax calculator.
Frequently asked questions
How is gratuity calculated?
If your employer is covered by the gratuity law, gratuity = 15 × last drawn monthly wages × years of service ÷ 26. Wages mean basic pay plus dearness allowance. A part year of more than six months counts as a full year, so 12 years 7 months counts as 13. On ₹60,000 a month that is about ₹4.5 lakh.
What changed for gratuity under the new labour codes?
The Code on Social Security, 2020 replaced the Payment of Gratuity Act from 21 November 2025. Fixed-term employees now get gratuity after one year of continuous service instead of five. Wages for gratuity must also be at least 50% of total pay: if allowances such as HRA are more than half your pay, the excess is added back to wages, which raises gratuity. Permanent employees still need five years.
How much gratuity is tax-free?
For private-sector employees, up to ₹20 L over your whole career is tax-free under Section 19 and Schedule II of the Income-tax Act, 2025 (earlier Section 10(10)). The exemption works the same in the old and new regimes. Gratuity for central and state government employees is fully tax-free.
Am I eligible for gratuity before five years?
Permanent employees need five years of continuous service, but gratuity is payable regardless of service if employment ends on death or disablement. Fixed-term employees qualify after one year. Some courts have counted four years and 240 working days in the fifth year as five years; check with your employer if you are close.
What if my employer is not covered by the gratuity law?
The law applies to establishments with 10 or more employees. If yours is not covered, any gratuity is paid under the employer's own scheme. For tax, the exempt part is the lowest of the gratuity received, ₹20 lakh, and half a month's average salary (of the last 10 months) for each completed year, which is the 15/30 formula used here.
Is there a maximum gratuity?
Gratuity under the Code is capped at ₹20 lakh. An employer may pay more under its own policy, but anything above your tax-free limit is taxed as salary in the year you receive it.