Gratuity calculator
Put in your last Basic + DA and how long you’ve worked, and I’ll show what you’re owed, whether you qualify yet, and how much of it is tax-free.
Most employers with 10 or more staff are. If unsure, choose Yes.
Fixed-term staff qualify after one year under the labour codes (from 21 Nov 2025).
Basic pay plus dearness allowance, from your payslip. Not CTC.
Your gratuity
₹2,01,923
- Service
- 7 years 0 months
- Years counted
- 7
- Formula
- ₹50,000 × 15 ÷ 26 × 7
- Tax-free (up to ₹20,00,000)
- ₹2,01,923
- Taxable if your employer pays above the cap
- ₹0
The Act caps gratuity at ₹20,00,000. Private-sector employees get up to ₹20,00,000 tax-free over their whole career.
Estimates for planning, not tax or legal advice. Rules change with each Budget and differ by employer, so check your offer letter, payslip or a professional before you act.
How it’s calculated
If your employer is covered by the Gratuity Act
Fifteen days’ wages for each year, where a day’s wage is a month’s Basic + DA divided by 26 (the working days in a month). Years of service are your completed years, plus one more if the part-year left over is more than six months. Anything over six months counts as a full year; exactly six months doesn’t.
Worked example. Basic + DA of ₹1,00,000 a month and 7 years of service: ₹1,00,000 × 15 ÷ 26 × 7 = ₹4,03,846. With 7 years 7 months the years counted become 8, and the gratuity ₹4,61,538.
Who qualifies
- Permanent employees: 5 years of continuous service.
- Fixed-term employees: 1 year, under the Code on Social Security, in force from 21 November 2025.
- Death or disablement: no minimum service.
The Act caps gratuity at ₹20,00,000. Your employer may pay more, but they don’t have to.
If your employer isn’t covered
Half a month’s pay for each completed year, with no rounding up of part-years. This is the formula the tax rules use; whether you’re paid it at all depends on your employer.
The labour codes’ 50% wage rule
Under the labour codes, “wages” leaves out most allowances, but if those allowances come to more than half your total pay, the excess is added back. In effect, the wage gratuity is worked out on can’t be less than half your total pay. Employers are still working through how they apply this, so the calculator shows it separately.
Tax
For private-sector employees, gratuity is tax-free up to ₹20,00,000 over your whole career (section 10(10) of the Income-tax Act 1961). Anything above that is taxed as salary. The Income-tax Act, 2025 applies from tax year 2026-27 and renumbers these sections. Government employees’ gratuity is fully exempt.
Sources: Payment of Gratuity Act 1972, section 4; Code on Social Security 2020, section 53 (Ministry of Labour and Employment); Income-tax Act 1961, section 10(10) (Income Tax Department).
Questions people ask
How is gratuity calculated?
For an employer covered by the Gratuity Act: last-drawn monthly Basic + DA × 15 ÷ 26 × years of service. A part-year of more than six months counts as a full year. For example, ₹1,00,000 a month for 7 years gives ₹4,03,846.
Do I get gratuity before 5 years?
Not as a permanent employee, unless you leave because of death or disablement. Fixed-term employees qualify after one year under the labour codes in force from 21 November 2025. Some courts have counted 4 years and 240 working days as 5 years, so if you’re that close, it’s worth asking an expert.
Is 6 months rounded up to a year?
No. Only a part-year of more than six months rounds up. 7 years 6 months counts as 7 years; 7 years 7 months counts as 8.
What is the maximum gratuity?
The Act caps it at ₹20,00,000. An employer can choose to pay more, but anything above ₹20,00,000 is taxable for private-sector employees.
Is gratuity taxable?
For private-sector employees, up to ₹20,00,000 over your whole career is tax-free under section 10(10) of the Income-tax Act 1961. The Income-tax Act 2025, which replaces the 1961 Act from April 2026, keeps this exemption but moves it to a different section number, so your Form 16 may cite a new reference.
Is gratuity part of my CTC?
Often, yes. Many employers show about 4.81% of Basic (15 ÷ 26 ÷ 12) as gratuity in CTC, but you only receive it when you leave after qualifying.
What if my employer isn’t covered by the Act?
They aren’t legally required to pay gratuity. If they do, the tax-free amount is worked out as half a month’s average pay (last 10 months) for each completed year, up to ₹20,00,000.
Numbers done. Now the decision.
Tell me what the numbers mean for you, and I’ll help you decide what to do next.