Gratuity Calculator (India): New Labour Code Rules 2026
Work out the gratuity you are owed when you resign, retire or finish a fixed-term contract, and how much of it is tax-free. Uses the 15/26 formula, the 50% wages rule of the Code on Social Security and the ₹20 lakh limit.
Your details
Most companies, shops and factories with 10 or more employees are covered.
Basic pay plus dearness allowance from your latest salary slip. Leave out HRA and other allowances here.
Your monthly gross or CTC. If Basic + DA is less than half of it, the new labour code counts half of it as wages.
Tax options
The ₹20 lakh tax-free limit is for your whole career, across all employers.
Your gratuity
| Service | |
| Years counted | |
| Monthly wages used | |
| Formula |
How to use this gratuity calculator
- Choose whether your employer is covered by the Payment of Gratuity Act. If you are unsure and the company has 10 or more employees, choose Yes.
- Enter your last monthly Basic + DA. For the new labour code check, also enter your total monthly pay.
- Enter your joining date and last working day, or type the years and months of service.
- Read the gratuity payable, the years counted and the tax-free part. Open Tax options if your employer is paying a different amount or you have claimed the exemption before.
Gratuity formula
For employees covered by the Payment of Gratuity Act, 1972 (now part of the Code on Social Security, 2020):
15 stands for 15 days of wages for every year of service, and 26 is the number of working days the law assumes in a month. A part year of more than six months counts as a full year, so 6 years 7 months is taken as 7 years, while 6 years 5 months is taken as 6 years.
If your employer is not covered by the Act, gratuity (where your employer pays it) is usually worked out as half a month’s average salary for each completed year: 15 × average monthly salary of the last 10 months × completed years ÷ 30. Part years are ignored.
What changed under the new labour codes
The Code on Social Security, 2020 came into force on 21 November 2025 along with the other labour codes. The 15/26 formula is the same, but three things changed:
- 50% wages rule. Wages for gratuity are Basic + DA (and retaining allowance). If these are less than half of your total pay, the shortfall is added back, so at least 50% of your pay counts. This raises gratuity for people with a low basic salary.
- Fixed-term employees are eligible after 1 year of service instead of 5, on a pro rata basis.
- Payment within 30 days. The employer has to pay gratuity within 30 days of it becoming due.
Example of the 50% rule: total monthly pay ₹1,00,000, Basic + DA ₹35,000, 10 years of service. Using Basic + DA alone, gratuity is 15 × 35,000 × 10 ÷ 26 = ₹2,01,923. Under the new code, wages are taken as ₹50,000 (half of total pay), so gratuity is 15 × 50,000 × 10 ÷ 26 = ₹2,88,462, an increase of ₹86,538.
Gratuity examples
Gratuity for a covered, permanent employee at different salaries and lengths of service (Basic + DA already at least 50% of pay):
| Monthly Basic + DA | 5 years | 10 years | 20 years |
|---|---|---|---|
| ₹20,000 | ₹57,692 | ₹1,15,385 | ₹2,30,769 |
| ₹30,000 | ₹86,538 | ₹1,73,077 | ₹3,46,154 |
| ₹50,000 | ₹1,44,231 | ₹2,88,462 | ₹5,76,923 |
| ₹75,000 | ₹2,16,346 | ₹4,32,692 | ₹8,65,385 |
| ₹1,00,000 | ₹2,88,462 | ₹5,76,923 | ₹11,53,846 |
Who is eligible for gratuity?
- Permanent employees need at least 5 years of continuous service with the same employer.
- Fixed-term employees need at least 1 year of service.
- The 5-year condition does not apply if the employee dies or is disabled; the gratuity then goes to the employee or their nominee.
- Gratuity is paid on resignation, retirement, superannuation, end of a fixed-term contract, death or disablement. It can be forfeited only in limited cases such as termination for misconduct that caused loss to the employer.
- Some courts have treated 4 years and 240 days of work in the fifth year as 5 years of continuous service. Check with your employer or a lawyer if you are close to the limit.
Tax on gratuity (FY 2026-27)
Gratuity is tax-free up to a limit, under both the old and the new tax regime. The amount above the limit is added to your salary income and taxed at your slab rate.
- Covered by the Act: the tax-free amount is the lowest of (a) gratuity received, (b) ₹20,00,000 and (c) 15/26 × last Basic + DA × years of service.
- Not covered by the Act: the lowest of (a) gratuity received, (b) ₹20,00,000 and (c) ½ × average Basic + DA of the last 10 months × completed years.
- Government employees: gratuity is fully tax-free.
- The ₹20 lakh limit is for your whole working life. If you claimed an exemption with an earlier employer, only the balance is available.
Gratuity for government employees
Central and state government employees get gratuity under their own service rules (for central government staff, the CCS (Pension) Rules), not under the formula above, and the limits are different. This calculator is meant for private sector and PSU employees covered by the Gratuity Act. Ask your accounts or pension office for the exact government figure.
Related tools
Income Tax Calculator FY 2026-27 · Retirement Savings Calculator · PPF Calculator · SIP Calculator
Frequently asked questions
How is gratuity calculated?
For employees covered by the Gratuity Act: 15 × last monthly Basic + DA × years of service ÷ 26. With a Basic + DA of ₹50,000 and 10 years of service, gratuity is 15 × 50,000 × 10 ÷ 26 = ₹2,88,462.
Is 4 years 7 months counted as 5 years for gratuity?
For the amount, a part year over six months counts as a full year. For eligibility, the law asks for 5 years of continuous service, so 4 years 7 months is not enough on its own. Some court rulings count 4 years and 240 working days in the fifth year as 5 years.
What is the maximum gratuity?
Under the Gratuity Act the maximum is ₹20,00,000. An employer may pay more under its own policy, but the tax-free limit stays at ₹20 lakh for your whole career.
Do fixed-term employees get gratuity after 1 year?
Yes. Under the Code on Social Security, 2020 (in force from 21 November 2025), fixed-term employees are eligible after 1 year of service, in proportion to the time they worked.
Does the new 50% wages rule increase my gratuity?
Only if your Basic + DA is less than half of your total pay. In that case the shortfall is added to wages, which increases gratuity. Enter your total monthly pay in the calculator to see the effect.
Why are 26 days used and not 30?
The Act assumes 26 working days in a month (excluding four Sundays). That is why gratuity uses 15/26 rather than 15/30 for covered employees.
When must the employer pay gratuity?
Within 30 days of it becoming due. If it is delayed or refused, you can approach the controlling authority under the labour department.
Is gratuity taxable in the new tax regime?
The gratuity exemption is available in both the old and the new regime. Only the part above the exempt limit is taxable.
Rules as of October 2026. This calculator gives an estimate for planning; your employer’s calculation, your appointment letter and the applicable law decide the final amount.