What this calculates
Enter your last monthly basic pay plus dearness allowance and your length of service, and this works out the gratuity due by the 15/26 formula — rounding your service as the law does, checking eligibility for permanent and fixed-term employees, applying the new labour code's 50% wage floor if you give your total pay, and capping it at ₹20 lakh.
The formula
Covered employers (10+ employees)
gratuity = 15 × monthly wages × years ÷ 26
Employers not covered
gratuity = 15 × monthly wages × completed years ÷ 30
Wages
basic pay + dearness allowance, and at least 50% of total payYears of service count more than six months in the final year as a full year. Gratuity is due after five years of continuous service for permanent employees and one year for fixed-term employees (from 21 November 2025, under the Code on Social Security, 2020), or at any time on death or disablement. At most ₹20 lakh is payable.
Worked example
At 10 years and 6 months the six months are not counted: 15 × 50,000 × 10 ÷ 26 = ₹2,88,461.54. A fixed-term employee on the same pay who leaves after 1 year 2 months gets 15 × 50,000 × 1 ÷ 26 = ₹28,846.15.
When to use it, and the mistakes to avoid
Use it before resigning or retiring to know what is due, to check the figure in your full and final settlement, or to see how much an extra few months of service is worth.
The mistakes that cost the most:
- Leaving just short of a round-up. At 10 years 6 months you are paid for 10; one more month makes it 11 — worth a full year's gratuity.
- Leaving just short of five years. A permanent employee with 4 years 11 months gets nothing.
- Using gross pay. The formula uses basic plus DA — unless allowances are over half of your pay, when the floor applies.
- Dividing by 30 when the employer is covered. Covered employers must use 26, which pays more.
- Assuming a fresh ₹20 lakh tax limit at every job. It is a lifetime limit.
This calculator is a guide; your employer's records and the law decide the final figure.
FAQ
How is gratuity calculated?
Gratuity = 15 × last monthly wages × years of service ÷ 26. Wages are basic pay plus dearness allowance. With ₹50,000 a month and 11 years counted, it is 15 × 50,000 × 11 ÷ 26 = ₹3,17,307.69. The 15 is fifteen days' wages for every year, and the 26 is the working days in a month.
How many years of service do I need for gratuity?
Five years of continuous service for a permanent employee. Under the Code on Social Security, in force from 21 November 2025, a fixed-term employee qualifies after one year. On death or disablement there is no minimum.
Does 4 years and 7 months count as 5 years?
Not for the five-year eligibility rule, which looks at your actual service. But once you are eligible, service of more than six months in the final year is counted as a full year - so 10 years and 7 months is paid as 11 years, while 10 years and 6 months is paid as 10.
What wages are used for gratuity?
Your last drawn basic pay plus dearness allowance. Under the new labour code, wages may not be less than half of your total pay: if allowances make up more than 50%, the excess is added back. With ₹40,000 basic on ₹1,00,000 total pay, gratuity is worked out on ₹50,000.
Is gratuity taxable?
For private-sector employees, gratuity up to ₹20 lakh is exempt from income tax - and that is a lifetime limit, so gratuity exempted at an earlier job counts against it. Anything above it is taxed as salary. Gratuity for government employees is fully exempt.
What is the maximum gratuity?
₹20 lakh for employees covered by the Act. Central government employees have a ₹25 lakh ceiling from 1 January 2024, but their gratuity is worked out under their own pension rules, which this calculator does not cover.