Logo
Financial Calculator

Gratuity Calculator - Payment of Gratuity India 2026

Gratuity = last wages × 15 × years ÷ 26, capped at ₹20 lakh. From 21 November 2025 the Code on Social Security counts allowances above 50% of pay as wages, and fixed-term staff qualify after 1 year. Enter your years and months for the exact amount.

Loading calculator...

Gratuity Under the New Labour Code (from 21 November 2025)

The four Labour Codes took effect on 21 November 2025. Gratuity now falls under the Code on Social Security, 2020. The 15/26 formula and the ₹20 lakh cap are unchanged. Three things are new:

  • 50% wage rule: if allowances (HRA, special allowance and the like) exceed 50% of total pay, the excess counts as wages for gratuity.
  • Fixed-term employees: pro-rata gratuity once they complete 1 year, instead of 5.
  • Contract expiry: gratuity is also payable when a fixed-term contract ends.
Effect of the 50% wage rule on gratuity
Total pay ₹1,00,000/month, 10 yearsWages for gratuityGratuity
Basic + DA only (old reading)₹30,000₹1,73,077
With 50% rule (allowances ₹70,000, ₹20,000 added back)₹50,000₹2,88,462

If your allowances exceed half your pay, enter the higher wage figure in the calculator. Source: Ministry of Labour FAQs on Labour Codes, which say the gratuity provisions apply from 21 Nov 2025. How employers treat earlier service can vary, so check with HR.

Gratuity Calculation Chart by Salary and Years

Last basic + DA × 15 × years ÷ 26, capped at ₹20 lakh (private sector, covered employers).

Gratuity amount for common salaries and years of service
Basic + DA5 yrs10 yrs15 yrs20 yrs25 yrs30 yrs
₹30,000₹86,538₹1,73,077₹2,59,615₹3,46,154₹4,32,692₹5,19,231
₹50,000₹1,44,231₹2,88,462₹4,32,692₹5,76,923₹7,21,154₹8,65,385
₹75,000₹2,16,346₹4,32,692₹6,49,038₹8,65,385₹10,81,731₹12,98,077
₹1,00,000₹2,88,462₹5,76,923₹8,65,385₹11,53,846₹14,42,308₹17,30,769
₹1,50,000₹4,32,692₹8,65,385₹12,98,077₹17,30,769₹20,00,000₹20,00,000

Central Government Gratuity Formula (7th CPC)

Central government employees are not on the 15/26 formula. Under the CCS (Pension) Rules, 2021, retirement gratuity is 1/4 of a month's basic pay + DA for each completed six-month period of qualifying service, up to 16.5 times basic + DA. At least 5 years of qualifying service is required.

The cap is ₹25 lakh from 1 January 2024 (up from ₹20 lakh), raised when DA reached 50% (DoPPW, via PIB). Example: basic + DA of ₹1,00,000 with 30 years of service = 60 half-years × ₹25,000 = ₹15 lakh, all tax-free.

The calculator above uses the private-sector formula. A pay revision raises gratuity too: estimate your revised basic with the 8th Pay Commission salary calculator.

Gratuity Calculation Formula

Gratuity Calculation Formulas

Understand the mathematical formulas used to calculate gratuity benefits.

Gratuity = (Last Drawn Salary × 15 × Years of Service) ÷ 26

Example:

Last Drawn Salary: ₹50,000, Years of Service: 10 years

(50,000 × 15 × 10) ÷ 26
= ₹2,88,462

Variables:

Last Drawn Salary - Basic salary + DA at the time of leaving
Years of Service - Total years of continuous service
15 - Fixed multiplier as per Gratuity Act
26 - Number of working days in a month

Maximum Gratuity = ₹20,00,000 (Current limit)

Example:

Even if calculated gratuity exceeds ₹20L, maximum payable is ₹20L

Min(Calculated Gratuity, ₹20,00,000)
= ₹20,00,000

Variables:

₹20,00,000 - Maximum gratuity limit as per Gratuity Act

These formulas provide the mathematical foundation for the calculations. Actual results may vary based on rounding, compounding frequency, and specific lender policies.

How Gratuity Is Calculated: Example and Rules

What is gratuity?

Gratuity is a lump sum your employer pays when you leave after at least 5 years of continuous service, on retirement, or on death or disablement. Fixed-term employees get it pro-rata after 1 year. You don't contribute anything. Many companies show it in CTC as about 4.81% of basic pay (15 ÷ 26 ÷ 12), which is why it shows up in your CTC but not in take-home pay. See the split in the salary calculator.

Worked example: 12 years 7 months on ₹70,000

  1. Wages = basic ₹60,000 + DA ₹10,000 = ₹70,000 a month.
  2. Service = 12 years 7 months. The extra 7 months is more than 6, so it counts as 13 years.
  3. Gratuity = ₹70,000 × 15 × 13 ÷ 26 = ₹5,25,000.
  4. That is under ₹20 lakh, so a private-sector employee pays no tax on it.

Why 15 and 26?

You earn 15 days' wages for every year of service. A monthly salary is turned into a daily wage by dividing by 26, the working days in a month after Sundays. That's why 15/26 pays a little more than half a month's salary per year. Employers outside the gratuity law often use 30 instead, which is also the basis for the tax-free limit for those employees (half a month's average salary per year).

Maximum limit and tax

The law caps the gratuity an employer must pay at ₹20 lakh, and ₹20 lakh is also the lifetime tax-free limit for private-sector employees. An employer can pay more, but the excess is taxed as salary at your slab. Work it out with the income tax calculator. Central and state government employees pay no tax on gratuity at all, and the central government cap is ₹25 lakh from 1 January 2024.

Which salary counts?

Use your last drawn basic pay plus dearness allowance. HRA, bonus, overtime and reimbursements don't count, but if your allowances are more than half your total pay, the new Labour Code adds the excess back to wages (see the example above). Leave encashment, the other big exit payout, is also worked out on basic + DA. Estimate it with the leave encashment calculator.

Taxable Gratuity Calculator - Tax Implications in India

Government Employees

  • Full Exemption: For employees of Central Government, State Government, and local authorities, the entire gratuity amount is fully exempt from tax under Section 10(10)(i).
  • No Limit: There is no monetary ceiling (like ₹20 Lakhs) for this exemption category.

Private Sector Employees (Covered under Act)

For employees covered by the Payment of Gratuity Act, 1972, the tax exemption is the least of the following three:

  • Actual Gratuity Received: The total amount paid by the employer.
  • Statutory Limit: ₹20,00,000 (Twenty Lakhs).
  • Formula Calculation: (15 days' salary) × (Completed years of service). Salary = Last drawn Basic + DA.

Private Sector Employees (Not Covered under Act)

For those not covered by the Act, the exemption is the least of:

  • Actual Gratuity Received: The amount paid by the employer.
  • Statutory Limit: ₹20,00,000 (Twenty Lakhs).
  • Half-Month Average: (Average salary of last 10 months) × 1/2 × (Completed years of service).

How to claim gratuity, documents and nomination

Steps to claim (no separate account needed)

  1. Submit Form I to employer within 30 days of becoming eligible (resignation/retirement).
  2. Provide bank details for NEFT and address/ID proof.
  3. Employer issues calculation and pays within 30 days; interest applies for delay.

Documents required

  • Form I (or Form J/K for nominees/legal heirs).
  • Relieving/retirement order, last salary slip, service certificate.
  • Identity/address proof and cancelled cheque.
  • In case of death: death certificate and proof of relationship.

Nominations and after demise

File nomination using Form F with your employer and update it after marriage or status changes. If the employee dies, payment goes to the nominee; if no nominee is recorded, legal heirs receive it on submission of required proofs/certificates. Interest is payable for delays.

Withdrawal terms & conditions

Gratuity is payable on resignation, retirement, death or permanent disablement. It is generally not withdrawable while in service. Misconduct causing financial loss may lead to partial/complete forfeiture after due process.

Essential Gratuity Information for Indian Employees

Important facts about gratuity calculation and eligibility

5 Years Minimum Service

Permanent employees need 5 years of continuous service. Not needed on death or disablement, and fixed-term employees get pro-rata gratuity once they finish 1 year.

Know the Formula

For covered establishments: (Last Salary × 15 × Years) ÷ 26. For non-covered: (Last Salary × 15 × Years) ÷ 30. Maximum limit is ₹20 lakhs.

Tax Exemption Benefits

Gratuity up to ₹20 lakhs is tax-free for private employees. Government employees enjoy complete tax exemption on gratuity amount.

Payment Timeline

Gratuity must be paid within 30 days of becoming due. Delay beyond this attracts interest at 10% per annum on the unpaid amount.

Gratuity Rules - Key Provisions

Code on Social Security, 2020 (replaced the Payment of Gratuity Act, 1972 from 21 Nov 2025)

Eligibility Criteria

Service Requirement

• Minimum 5 years continuous service (permanent employees)
• Fixed-term employees: pro-rata after 1 year
• Exception: Death/disablement during service
• Resignation before 5 years = No gratuity

Establishment Coverage

• Factories with 10+ workers
• Mines, oil fields, plantations
• Ports, railways, companies
• Educational/medical institutions

Calculation & Limits

Formula

(Last Salary × 15 × Years of Service) ÷ 26

Maximum Limit

₹20,00,000 (Twenty Lakhs) - Amended in 2018

Salary Components

Basic + DA + retaining allowance, plus any allowances above 50% of total pay

Who should use this gratuity calculator?

Retiring Employees

Calculate your final gratuity payout before retirement.

Job Changers

Check eligibility and amount after 5+ years of service.

HR & Payroll

Validate calculations using the 15/26 formula.

Nominees

Estimate claim amount in case of employee demise.

Frequently Asked Questions about Gratuity

Common questions about gratuity calculation, eligibility, and payment

What changed in gratuity under the new Labour Code?

The Code on Social Security, 2020 came into force on 21 November 2025 and replaced the Payment of Gratuity Act, 1972. The formula is unchanged (15 days' wages for each year, monthly wages divided by 26) and the cap is still ₹20 lakh. What changed: (1) wages now include any allowances above 50% of total pay, which raises gratuity for people with a low basic salary; (2) fixed-term employees get pro-rata gratuity once they complete 1 year; (3) gratuity is also payable when a fixed-term contract ends. The Labour Ministry says the gratuity provisions apply from 21 November 2025.

What is gratuity and who is eligible for it?

Gratuity is a lump sum monetary benefit paid by an employer to an employee as a token of appreciation for long-term service rendered to the organization. Under the Code on Social Security, 2020 (which replaced the Payment of Gratuity Act, 1972 from 21 November 2025), any permanent employee who completes a minimum of 5 years of continuous service is eligible for gratuity. This law applies to all establishments in India employing 10 or more persons, including factories, mines, oilfields, plantations, ports, railways, shops, and other commercial establishments. The gratuity amount is calculated using the formula: 15/26 multiplied by last drawn salary (basic plus dearness allowance) multiplied by years of service. The maximum gratuity payable is capped at Rs 20 lakhs. The 5-year condition is waived on death or disablement, and fixed-term employees get pro-rata gratuity after 1 year.

What is 15 26 in gratuity calculation?

The 15/26 in gratuity calculation is the formula used for establishments covered under the Payment of Gratuity Act. The number 15 represents 15 days of salary for each completed year of service, and 26 represents the average working days in a month (excluding Sundays). The formula is: (Last Salary × 15 × Years of Service) ÷ 26. For non-covered establishments, 30 is used instead of 26.

How is gratuity calculated for private employees?

For private employees in establishments covered under Gratuity Act: (Last drawn salary × 15 × completed years of service) ÷ 26. For non-covered establishments: (Last drawn salary × 15 × completed years) ÷ 30. Last salary includes basic + DA. Maximum limit is ₹20 lakhs. Use our gratuity calculator online to get instant accurate results.

How to calculate gratuity amount step by step?

Step 1: Identify your last drawn monthly salary (Basic + DA). Step 2: Count total completed years of service (a part-year counts only if it exceeds 6 months). Step 3: Check if your company is covered under the Act (use 26) or not (use 30). Step 4: Apply formula: (Last Salary × 15 × Years) ÷ 26 (or 30). Step 5: If result exceeds ₹20 lakhs, maximum payable is ₹20 lakhs. Our gratuity calculator for private employees does this automatically.

What salary components are considered for gratuity calculation?

Gratuity is based on wages: basic pay, dearness allowance and retaining allowance. HRA, conveyance, overtime, bonus, performance incentives, ESOPs and reimbursements are not wages. Under the Code on Social Security, in force from 21 November 2025, if your allowances add up to more than 50% of total pay, the excess is added back to wages. Example: total pay ₹1,00,000, basic + DA ₹30,000, allowances ₹70,000. Half of total pay is ₹50,000, so ₹20,000 is added back and gratuity is worked out on ₹50,000. For 10 years that is ₹2,88,462 instead of ₹1,73,077. Government employees follow their pay commission rules.

Is gratuity taxable? What are the tax implications?

The tax treatment of gratuity in India depends on the employee category and the amount received. For government employees, the entire gratuity amount is fully exempt from income tax under Section 10(10)(i) of the Income Tax Act, with no upper limit on exemption. For private sector employees covered under the Payment of Gratuity Act, the tax exemption is available up to Rs 20 lakhs as per the current limit set by the government. Any gratuity amount exceeding Rs 20 lakhs is treated as taxable salary income and taxed at the applicable income tax slab rate. For private employees not covered under the Act, the exemption is calculated as the least of three amounts: actual gratuity received, Rs 20 lakhs, or half month's salary for each completed year of service. The 4% health and education cess also applies on the taxable portion.

What is the 7th pay commission gratuity calculation formula?

Central government employees under the CCS (Pension) Rules, 2021 get retirement gratuity of 1/4 of a month's basic pay + DA for each completed six-month period of qualifying service, up to 16.5 times basic + DA. They need at least 5 years of qualifying service. The cap rose from ₹20 lakh to ₹25 lakh from 1 January 2024, when DA reached 50%. Example: basic + DA of ₹1,00,000 and 30 years of service gives 60 six-month periods × ₹25,000 = ₹15 lakh. The full amount is tax-free. State governments set their own rules and caps.

When can gratuity be forfeited by the employer?

Under Section 4(6) of the Payment of Gratuity Act, 1972, an employer can forfeit gratuity wholly or partially under specific circumstances. If an employee's services are terminated due to riotous or disorderly conduct, or any act of violence committed during the course of employment, the gratuity can be forfeited to the extent of the damage or loss caused to the employer's property. Additionally, if the employee is terminated for any act involving moral turpitude, such as theft, fraud, or dishonesty committed during employment, the entire gratuity amount can be forfeited. However, the employer must conduct a proper domestic inquiry following principles of natural justice, giving the employee a fair opportunity to defend themselves. Routine resignation, retrenchment, layoff, or retirement cannot lead to gratuity forfeiture. The employer bears the burden of proving that the misconduct warrants forfeiture, and any dispute can be raised before the Controlling Authority under the Act.

What if I change jobs before completing 5 years?

A permanent employee who resigns before 5 years of continuous service is not entitled to gratuity. The 5-year rule does not apply on death or disablement (paid to the nominee or legal heirs), or when a fixed-term contract ends: under the Code on Social Security, fixed-term employees get pro-rata gratuity after 1 year of service. Some employers pay gratuity for shorter service as company policy.

How are part years calculated in gratuity?

Under the Payment of Gratuity Act, 1972, the rounding rule for part years is straightforward: any fraction of a year exceeding 6 months is rounded up and treated as one complete year for gratuity calculation purposes. For example, if an employee has served for 10 years and 8 months, the service period is rounded up to 11 years for computing gratuity. Conversely, if the service period is 10 years and 4 months, the extra 4 months are disregarded, and gratuity is calculated based on 10 completed years only. This rounding provision significantly impacts the gratuity amount. For instance, with a last drawn salary of Rs 50,000, the difference between 10 and 11 years of service means an additional Rs 28,846 in gratuity (calculated as 50,000 multiplied by 15 divided by 26). Employees approaching the 6-month threshold should consider timing their resignation accordingly to maximize their gratuity benefit.

Will I get gratuity for 4.8 years of service?

Not automatically. The six-month rounding rule is for working out the amount, not for meeting the 5-year condition. Some High Court rulings have treated 4 years plus 240 days worked in the fifth year as 5 years of continuous service, but employers often refuse, and you may have to claim it before the Controlling Authority. Fixed-term employees are different: they qualify after 1 year. Our calculator follows the strict 5-year rule.

How to calculate gratuity in months?

To calculate gratuity in months, first convert your total service period into years using the rounding rule: any period exceeding 6 months counts as 1 full year. For example, if you've worked for 7 years and 9 months, count it as 8 years. Then apply the standard formula: (Last Salary × 15 × 8) ÷ 26 for covered establishments. Our gratuity calculator in months automatically handles this conversion—simply input your years and remaining months, and it will calculate the correct gratuity amount following the 6-month rounding provision of the Gratuity Act.

What is the difference between NPS and gratuity?

NPS (National Pension System) and gratuity are both retirement benefits but serve different purposes. Gratuity is a one-time lump sum payment made by your employer after 5 years of service, calculated as (Last Salary × 15 × Years) ÷ 26, with no employee contribution required. NPS is a voluntary retirement savings scheme where both you and your employer contribute regularly to build a retirement corpus, which is partially withdrawn as lump sum and partially used to purchase an annuity. Gratuity is mandatory under the Payment of Gratuity Act for eligible establishments, while NPS is optional. You can receive both benefits—they complement each other for comprehensive retirement planning. Use our gratuity calculator to estimate your gratuity, and an NPS calculator separately for pension planning.
Gratuity Calculator User Reviews and Ratings

Disclaimer: Results are estimates for financial planning purposes only and do not constitute financial, tax, investment, or legal advice. Actual values may vary based on your lender, market conditions, and individual circumstances. Consult a qualified CA, CFP, or financial advisor before making any financial decisions.