Gratuity Calculator
Calculate your gratuity payout based on last drawn wages and years of service. Uses the 15/26 formula under the Code on Social Security, 2020, including the fixed-term employee rule.
Service Details
Basic + DA + retaining allowance (Labour Code "wages")
Minimum 5 years (1 year for fixed-term employees)
More than 6 months rounds up to 1 year (covered employees only)
Your gratuity payout
- Last drawn salary
- Service counted
- Tax
Gratuity Growth by Years of Service
Gratuity at Different Service Lengths
| Years of Service | Gratuity Amount | Tax-Free Limit (private sector) |
|---|
Gratuity uses the 15/26 formula under the Code on Social Security, 2020, which replaced the Payment of Gratuity Act, 1972 from 21 Nov 2025. Statutory gratuity for covered employees is capped at ₹20 lakh. For employees not covered, 15/30 is used on the 10-month average salary and completed years only. Private-sector gratuity is tax-free up to ₹20 lakh (lifetime). Central/State government employees' gratuity is fully tax-exempt. Under the Labour Codes, if your excluded allowances (HRA, conveyance, bonus etc.) exceed 50% of total pay, the excess is added to wages. Government employees' gratuity follows their own service rules; the Code formula is shown as an estimate.
Not sure what to do with this result?
Ask FinChat, our AI planning assistant, about your gratuity result. Free to try, no signup.
What is Gratuity and How is it Calculated?
Gratuity is a lump sum an employer pays an employee for long service, usually on retirement or leaving the job. Under the Code on Social Security, 2020 (which replaced the Payment of Gratuity Act, 1972 from 21 November 2025), any employee who has completed 5 or more years of continuous service is eligible for gratuity upon resignation, retirement, or superannuation. Fixed-term employees qualify after 1 year of service.
The gratuity formula for employees covered under the Act is: Gratuity = (15 × Last Drawn Salary × Years of Service) ÷ 26. Here, "last drawn salary" means wages: Basic Salary + Dearness Allowance (DA) + retaining allowance. Under the Labour Codes, if excluded components such as HRA, conveyance and bonus exceed 50% of your total pay, the excess is added back to wages. The divisor 26 represents the working days in a month. For employees not covered under the Act, the divisor is 30 (calendar days).
For covered employees, a part-year of more than 6 months is rounded up when computing the amount. For example, 7 years and 8 months is treated as 8 years. Eligibility itself still needs 5 full years of continuous service. For employees not covered, only completed years count.
How to Use This Gratuity Calculator
- 1
Enter your last drawn salary
This should be your monthly wages: Basic + Dearness Allowance (DA) + retaining allowance. HRA and other allowances are excluded, unless together they exceed 50% of your total pay; then the excess counts as wages. If you are not covered by the Code, use the average of your last 10 months.
- 2
Enter years and months of service
Enter your total completed years of service and any additional months. If additional months are more than 6, the calculator rounds up to the next year for covered employees.
- 3
Select employee type
Establishments with 10+ employees are covered under the Code on Social Security (15/26 formula). Fixed-term employees qualify after 1 year. Government employees are fully tax-exempt. Others use the 15/30 formula.
- 4
View your gratuity amount and tax status
See the exact gratuity payout, the formula used, and the growth table showing how your gratuity would change at different service lengths.
Gratuity Tax Rules in India
Government Employees
Gratuity received by central/state government employees is fully exempt from income tax. There is no upper limit on the tax-free gratuity amount for government employees.
Private Sector (Covered)
For covered employees, the tax-free limit is the least of: actual gratuity received, ₹20 lakh (as per section 19 of the Income-tax Act, 2025, old section 10(10)), or the formula amount (15/26 × salary × years). Any amount above this limit is taxable.
Private Sector (Not Covered)
For employees not covered under the Act, the tax-free limit is the least of: actual gratuity, ₹20 lakh, or half month's salary for each completed year (using average of last 10 months' salary).
5-Year Rule
To be eligible for gratuity, you must complete at least 5 years of continuous service with the same employer. Exceptions: fixed-term employees qualify after 1 year (from 21 Nov 2025), and on death or disablement gratuity is payable regardless of tenure.
