Gratuity Calculator
About the Gratuity Calculator
Gratuity is a lump sum an employer pays you for long service, usually when you resign or retire. Under the Code on Social Security, 2020 — which replaced the Payment of Gratuity Act on 21 November 2025 — it becomes payable once you complete five years of continuous service with an employer, or one year on a fixed-term contract.
This calculator uses the standard formula for employees covered by the Code: 15 days of your last drawn wages (basic + dearness allowance) for every completed year of service, with the result capped at ₹20 lakh.
Frequently asked questions
How is gratuity calculated?
For employees covered by the Code on Social Security: Gratuity = 15 × last drawn monthly wages (basic + DA) × years of service ÷ 26, where 26 is the assumed number of working days in a month. A final part-year of more than six months counts as a whole year, so 7 years and 7 months is 8. The amount is capped at ₹20 lakh.
How many years do I need to qualify for gratuity?
You generally need five years of continuous service with the same employer. A fixed-term employee qualifies after one year, and the condition is waived if service ends due to death or disablement.
How are part-years of service counted?
A year counts as completed if you worked more than six months in it; six months or less is ignored. So 6 years 7 months counts as 7 years, while 6 years 5 months counts as 6.
Is gratuity taxable?
For private employees covered by the Act, gratuity is tax-free up to ₹20 lakh over your lifetime; anything above that is taxed at your slab. Government employees' gratuity is fully exempt. (Limits as of 2026.)
Is gratuity based on basic salary or gross?
On wages — basic pay plus dearness allowance — not your full gross or CTC. Since 21 November 2025 the Labour Codes add allowances back in when they make up more than half of your total pay, so wages are never less than half of it.
Disclaimer: This calculator is for information and education only. It is not investment advice and not a recommendation, and it is not legal, tax or payroll advice. Statutory rates, wage ceilings and state rules such as professional tax and minimum wages change and vary; the employment contract, the employer’s payroll and the law in force decide the actual amounts. Every figure is computed solely by applying the formula and assumptions stated on this page to the inputs you entered.