Gratuity Calculator — How Much Gratuity Will You Get?
Last drawn basic + DA and years of service — and the gratuity payable, how much of it is tax-free, and whether you are eligible yet.
Gross or CTC per month — applies the labour code rule that wages are at least 50% of pay.
Result
- Wages used
- ₹40,000.00
- Years counted
- 8
- Gratuity payable
- ₹1,84,615.38
- Tax-free
- ₹1,84,615.38
- Taxable
- ₹0.00
Basic + DA × 15 ÷ 26 × years — 6 months or more in the last year counts as a full year.
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Quick answer
Gratuity = Last drawn monthly basic + DA × 15 ÷ 26 × Years of service. Six months or more in the last year counts as a full year. Eligible after 5 years of continuous service, or 1 year for fixed-term employees under the Code on Social Security. Up to ₹20 lakh is tax-free.
| Formula | Basic + DA × 15 ÷ 26 × years |
|---|---|
| Eligibility | 5 years (fixed-term: 1 year) |
| Tax-free limit | ₹20 lakh, lifetime |
| Law | Code on Social Security, 2020 (from 21 Nov 2025) |
Gratuity is a lump sum an employer pays when an employee leaves after long service — on resignation, retirement, death or disablement. Since 21 November 2025 it is governed by the Code on Social Security, 2020, which replaced the Payment of Gratuity Act, 1972 but kept its formula.
Two things changed with the labour codes: fixed-term employees qualify after one year instead of five, and "wages" must be at least half of total pay — so a salary structure with a small basic and large allowances no longer shrinks gratuity. Rates and limits as of 12 October 2026.
The formula
- Covered by the Act / Code
Basic + DA × 15 ÷ 26 × Years of service- Years of service
Completed years, + 1 if the last part-year is 6 months or more- Not covered (fewer than 10 employees)
Average basic + DA of last 10 months × ½ × Completed years- Tax-free gratuity
Least of: gratuity received, formula amount, ₹20 lakh
A worked gratuity calculation
An employee leaves after 7 years and 8 months with a last drawn basic + DA of ₹40,000 a month. The 8 months round up, so service counts as 8 years. Gratuity = 40,000 × 15 ÷ 26 × 8 = ₹1,84,615.
Why 15 and 26? Gratuity is 15 days' wages for each year of service, and a month is taken as 26 working days — so 15/26 of a month's wages per year.
New gratuity rules under the labour codes
Fixed-term employees now become eligible after one year of service under the contract. Permanent employees still need five years of continuous service, except on death or disablement, when there is no minimum.
Wages for gratuity are basic pay, dearness allowance and retaining allowance. If the allowances excluded from wages are more than 50% of total remuneration, the excess is added back to wages. Enter your total monthly pay in the calculator to apply this rule.
Tax on gratuity
For private-sector employees, gratuity is tax-free up to the least of the amount received, the formula amount and ₹20 lakh — a lifetime limit across all employers. Anything above it is taxed as salary. Government employees' gratuity is fully exempt.
Employers usually provide for gratuity every month (about 4.81% of basic) and show it as part of CTC. Payroll software can keep that provision and the eligibility date for every employee.
Questions people ask.
What is the formula to calculate gratuity?
Gratuity = Last drawn monthly basic + DA × 15 ÷ 26 × number of years of service, counting 6 months or more in the final year as a full year.
After how many years is gratuity paid?
After 5 years of continuous service for permanent employees. Under the Code on Social Security, fixed-term employees qualify after 1 year. On death or disablement no minimum applies.
Is 4 years 8 months eligible for gratuity?
Not under the five-year rule as written, though some High Courts have counted 4 years and 240 working days as five years. Fixed-term employees qualify after one year.
How much gratuity is tax-free?
For private-sector employees, up to ₹20 lakh in a lifetime, limited to the formula amount. Government employees' gratuity is fully exempt.
What is the 50% wage rule for gratuity?
Under the labour codes, if allowances excluded from wages exceed half of total remuneration, the excess is treated as wages — so gratuity is calculated on at least 50% of total pay.
Is gratuity part of CTC?
Often, yes. Employers commonly include a monthly gratuity provision of about 4.81% of basic in CTC, though it is paid only when the employee leaves after becoming eligible.
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