Labour codes · 2025

Gratuity Calculator

Calculate your gratuity under the new labour codes — 15 days' wages for every year of service, with the ₹20 lakh tax-free limit.

Employment type

₹
₹

Gross monthly remuneration. If basic + DA is under 50% of it, the labour codes count 50% as wages.

Estimated gratuity

₹3,17,308

11 years counted × ₹50,000 wages

Tax-free

₹3,17,308

Taxable

₹0

Calculation Assumptions

Results can differ across apps when compounding or contribution timing assumptions change.

  • Covered employees: 15 × last drawn wages × years ÷ 26, where a final part-year of more than 6 months counts as a full year.
  • Not covered: 15 × wages × completed years ÷ 30 (the formula used for tax exemption).
  • Under the Code on Social Security, wages can't be less than 50% of total pay; enter your total monthly pay to apply this.
  • Private-sector gratuity is tax-free up to ₹20 lakh in a lifetime; government employees' gratuity is fully exempt.

Reviewed October 2026

How gratuity is calculated

Gratuity is a lump sum your employer pays when you leave after long service. The Code on Social Security, 2020 — in force since 21 November 2025 — keeps the familiar formula but makes fixed-term employees eligible after one year and widens the definition of wages.

Gratuity formula

Gratuity = 15 × last drawn monthly wages × years of service ÷ 26

Wages = basic + DA
A final part-year of more than 6 months counts as a full year

15/26 represents 15 days' wages for every year of service, on a 26-working-day month. If your employer isn't covered, the tax-exemption formula is half a month's average salary for each completed year (15/30).

What changed with the labour codes

  • Fixed-term employees are eligible after 1 year of continuous service. Permanent employees still need 5 years (except on death or disablement).
  • 'Wages' can't be less than 50% of total remuneration. If allowances exceed 50% of your pay, the excess is added back — which raises gratuity for people with a low basic salary.

Worked example

Last drawn basic + DA of ₹50,000 and service of 10 years 7 months. The 7 months count as a full year, so gratuity = 15 × ₹50,000 × 11 ÷ 26 = ₹3,17,308.

Tax on gratuity

For private-sector employees, gratuity is tax-free up to a lifetime limit of ₹20 lakh; anything above is taxed at your slab rate. Government employees' gratuity is fully tax-free.

Frequently asked questions

Am I eligible for gratuity after 4 years and 8 months?

For permanent employees, the law requires 5 years of continuous service. Some courts have counted 4 years and 240 days as 5 years, but don't rely on it — check with your employer.

Is gratuity part of CTC?

Many employers show it in CTC (about 4.81% of basic), but you receive it only when you leave after becoming eligible.

How soon must gratuity be paid?

Within 30 days of it becoming payable. Delays attract interest.

Related calculators