Gratuity Calculator
Estimate the gratuity you’ll receive when you leave or retire (new labour code rules, 2026)
What Is Gratuity?
Gratuity is a lump sum your employer pays you as a thank-you for long service – usually when you resign, retire or are laid off after at least five years. It’s paid on top of your final salary and PF, and up to ₹20 lakh of it is tax-free. For many people, it’s one of the largest single payments they receive in their career.
India’s new labour codes, in force from 21 November 2025, changed some important gratuity rules. The calculator above follows the new rules.
How to Use the Gratuity Calculator
- Enter your monthly basic salary plus DA – your last drawn amount.
- Enter your monthly gross salary (optional) so the calculator can apply the new 50% wage rule.
- Enter your years and months of service.
- Choose permanent or fixed-term, and whether your employer is covered by the gratuity law.
The Gratuity Formula
Gratuity = 15 × last monthly wages × years of service ÷ 26
Why 15 and 26? You get 15 days’ wages for every year of service, and a month is treated as 26 working days. A part-year of more than six months counts as a full year – so 10 years and 7 months counts as 11 years, but 10 years and 6 months counts as 10.
Example: last monthly wages of ₹50,000 and 10 years of service: 15 × 50,000 × 10 ÷ 26 = ₹2,88,462.
| Monthly Wages | 5 Years | 10 Years | 20 Years | 30 Years |
|---|---|---|---|---|
| ₹25,000 | ₹72,115 | ₹1,44,231 | ₹2,88,462 | ₹4,32,692 |
| ₹50,000 | ₹1,44,231 | ₹2,88,462 | ₹5,76,923 | ₹8,65,385 |
| ₹1,00,000 | ₹2,88,462 | ₹5,76,923 | ₹11,53,846 | ₹17,30,769 |
If your employer isn’t covered by the gratuity law but pays gratuity anyway, the tax rules use a slightly different formula: 15 × average monthly salary × completed years ÷ 30.
What Changed Under the New Labour Codes
1. The 50% Wage Rule
Many companies kept basic salary low and paid most of the salary as allowances, which kept gratuity small. Under the new codes, if allowances like HRA and conveyance make up more than half your pay, the excess is counted as wages. In effect, the salary used for gratuity is at least 50% of your total pay.
Example: your basic salary is ₹30,000 out of a gross of ₹1,00,000. Under the old approach, 10 years of service gave ₹1,73,077. With the salary raised to ₹50,000 (half your gross), it becomes ₹2,88,462 – about ₹1.15 lakh more.
2. Fixed-Term Employees Qualify After One Year
Permanent employees still need five years of continuous service. But fixed-term employees – people hired on a contract for a set period – now become eligible after just one year, with gratuity calculated pro rata.
The five-year rule doesn’t apply if an employee dies or becomes disabled; gratuity is then paid to them or their nominee regardless of service length.
How Gratuity Is Taxed
- Government employees: gratuity is fully tax-free.
- Private-sector employees: gratuity is tax-free up to ₹20 lakh over your whole career. Anything above that is added to your income and taxed at your slab rate.
The ₹20 lakh tax-free limit applies in both the old and new tax regimes.
What to Do With Your Gratuity
Gratuity often arrives at a turning point – a job change or retirement. Don’t let it disappear into everyday spending:
- Changing jobs? Top up your emergency fund, or prepay a costly loan – see our Home Loan Prepayment Calculator.
- Retiring? It can become part of your retirement income – see how a lump sum can pay you monthly with our SWP Calculator, or plan your overall number with the Retirement Planner.
Questions People Actually Ask Us
Do I get gratuity if I resign after 4 years? As a permanent employee, generally no – you need five years of continuous service. As a fixed-term employee, you qualify after one year.
Is gratuity part of my CTC? Many companies include it in CTC, even though you only receive it when you leave after the qualifying period.
When must my employer pay? Within 30 days of it becoming payable. If your employer delays, you can approach the labour authorities.
Is there a maximum? The amount payable under the law is capped at ₹20 lakh. Your employer can pay more voluntarily, but anything above ₹20 lakh is taxable.
Disclaimer: This calculator gives an estimate based on the Code on Social Security, 2020 as in force from 21 November 2025. How “wages” are calculated under the new codes can depend on your salary structure, and some details are still being clarified. Your employer’s actual calculation may differ. This calculator has no connection to any government body. See our full Disclaimer.
Also Try These Calculators on TappingMoney:
- Retirement Planner – Figure out your retirement number
- NPS Calculator – Plan your pension
- SWP Calculator – Turn a lump sum into monthly income
- Income Tax Calculator – Compare the old and new tax regimes
Page last updated: October 2026 | Free to use | No sign-up needed