How to use the gratuity calculator
Enter your last drawn monthly salary (basic + dearness allowance), your years and months of service, whether you are permanent or on a fixed-term contract, and whether your employer is covered by the gratuity law.
For example, with a salary of ₹50,000 and 10 years 7 months of service, the 7 months count as a full year, so gratuity is ₹50,000 × 15 ÷ 26 × 11 = about ₹3.17 lakh, all of it tax-free.
The gratuity formula
Gratuity = last drawn salary × 15 ÷ 26 × years of service
15 days' wages for every year, where a month is taken as 26 working days. For employers not covered by the law, the usual formula is 15 ÷ 30 × average salary of the last 10 months × completed years.
What the new labour codes changed
The Code on Social Security, 2020 came into force on 21 November 2025 and replaced the Payment of Gratuity Act, 1972:
- Fixed-term employees now get gratuity after 1 year of service instead of 5.
- Wages are basic + DA + retaining allowance; if allowances are more than 50% of total pay, the excess is added back, which can raise gratuity.
- Permanent employees still need 5 years of continuous service, except on death or disability.
Tax on gratuity
For private-sector employees, gratuity is tax-free up to ₹20 lakh over a lifetime; anything above is taxed as salary. Government employees' gratuity is fully tax-free.
Frequently asked questions
What is the gratuity formula?
Gratuity = last drawn monthly salary (basic + DA) × 15 ÷ 26 × years of service. For ₹50,000 salary and 10 years, gratuity is about ₹2.88 lakh.
When am I eligible for gratuity?
Permanent employees get gratuity after 5 years of continuous service. Under the new labour codes in force from 21 November 2025, fixed-term employees qualify after 1 year. There is no minimum period on death or disability.
How are part years counted?
If you work more than 6 months into a year, it counts as a full year. For example, 10 years 7 months counts as 11 years, but 10 years 5 months counts as 10.
What counts as salary for gratuity?
Basic pay plus dearness allowance. Under the new labour codes, if allowances make up more than half of your total pay, the extra is added back to wages, which can raise your gratuity.
Is gratuity taxable?
Gratuity is tax-free up to ₹20 lakh in your lifetime for private-sector employees. Government employees' gratuity is fully tax-free.
Last reviewed: 13-10-2026. Rates and rules are checked against official sources; tell us if something has changed. Contact