Gratuity Calculator 2026 – New Labour Code Rules

Gratuity Calculator – How Much Gratuity Will You Get in 2026?

This free gratuity calculator tells you how much gratuity your employer owes you when you leave a job. Gratuity is a lump sum paid as a thank-you for long service, and in India it is a legal right, not a favour. Since 21 November 2025 the rules come from the Code on Social Security, 2020, which replaced the Payment of Gratuity Act, 1972. The formula stayed the same, but the new Labour Code changed two things that matter a lot: what counts as "wages", and who can claim gratuity after only one year.

Enter your last drawn Basic + Dearness Allowance and how long you worked. The calculator picks the right formula for your employer type, rounds your service the way the law says, checks whether you are eligible, and splits the result into the tax-free and taxable parts.

Gratuity calculation formula

Gratuity = 15 × last drawn wages × years of service ÷ 26

The 15 stands for 15 days of wages for each year of service. The 26 is the number of working days in a month (the law ignores four Sundays). So in effect you get a little more than half a month's wages for every year you worked. "Wages" here means Basic pay + Dearness Allowance, plus any retaining allowance – not your full CTC.

Example: ₹50,000 Basic + DA and 10 years of service

15 × 50,000 × 10 ÷ 26 = ₹2,88,462. If you had worked 10 years and 7 months, the 7 months would count as a full year, and your gratuity would rise to 15 × 50,000 × 11 ÷ 26 = ₹3,17,308. With 10 years and 6 months the extra months would be ignored, because the law needs more than six months.

Gratuity table by salary and years of service

Here is the gratuity payable under the 15/26 formula for common salary levels. Use the calculator above for your exact numbers.

What Changed Under the New Labour Code?

1. The 50% wage rule

Many companies kept Basic pay low and paid most of the salary as allowances, which kept gratuity small. The Code on Social Security stops this. If allowances that are excluded from wages (HRA, conveyance, special allowance and so on) are more than 50% of your total remuneration, the excess is added back to wages. In simple terms, wages for gratuity must be at least half of your total pay.

Example: your monthly pay is ₹1,00,000 but Basic + DA is only ₹35,000. Under the old Act, 10 years gave 15 × 35,000 × 10 ÷ 26 = ₹2,01,923. Under the 50% rule, wages become ₹50,000 and gratuity becomes ₹2,88,462 – about ₹86,500 more. Open "Apply the 50% wage rule" in the calculator and enter your total monthly pay to see the effect on your own salary.

2. Gratuity after 1 year for fixed-term employees

Fixed-term employees – people hired on a contract for a set period – can now claim gratuity after just one year of continuous service, on a pro-rata basis. Permanent employees still need five years. Choose "Fixed-term contract" in the calculator to apply the one-year rule.

3. What did not change

• The 15/26 formula and the rounding rule for part-years.
• The ₹20 lakh statutory ceiling for employees covered by the law.
• No minimum service when an employee dies or becomes disabled – the gratuity goes to the nominee or the employee.
• The tax treatment: up to ₹20 lakh is tax-free for non-government employees.

Who Is Eligible for Gratuity?

• Permanent employees with at least 5 years of continuous service who resign, retire or are laid off.
• Fixed-term employees with at least 1 year of service.
• Any employee who dies or is disabled by accident or illness, whatever the length of service.
• Establishments with 10 or more employees on any day in the last 12 months are covered. Once covered, an employer stays covered even if headcount later falls.

Several High Courts have held that 4 years and 240 days of work (190 days for underground mines) counts as five years of continuous service. Employers do not always accept this, so the calculator flags it as a warning rather than marking you eligible.

Is Gratuity Taxable?

For government employees, gratuity is fully tax-free. For private and PSU employees, the tax-free amount is the lowest of: the gratuity actually received, the amount worked out by the formula, and ₹20 lakh. The ₹20 lakh limit is for your whole working life, so if you received tax-free gratuity from an earlier employer, it reduces what is left. Anything above the limit is added to your salary and taxed at your slab rate. You can check the tax on the taxable part with our income tax calculator.

The ₹25 lakh figure you may have read about is the maximum gratuity that the central government pays its own employees (raised from ₹20 lakh on 1 January 2024 when DA reached 50%). It is a payment ceiling for government staff, not a higher tax-free limit for private employees.

Central Government Gratuity (Retirement Gratuity)

Central government employees get retirement gratuity under the CCS (Pension) Rules, not the 15/26 formula. They receive one-fourth of a month's Basic + DA for every completed six months of qualifying service, up to a maximum of 16.5 months' emoluments and ₹25 lakh. With 33 years of service and Basic + DA of ₹1,20,000, gratuity is 16.5 × 1,20,000 = ₹19,80,000. Choose "Central / State Government" in the calculator for this formula, and use the retirement date calculator to find when you retire.

How to Use the Gratuity Calculator

1. Choose your employer type: covered private company, uncovered private employer, or government.
2. Select permanent or fixed-term, and the reason for leaving.
3. Enter your last drawn monthly Basic + DA. Find these on your latest payslip.
4. Optional: open the 50% wage rule box and enter your total monthly pay.
5. Enter your service in years and months, or your joining and leaving dates.
6. Tap Calculate Gratuity to see the amount, eligibility, tax-free and taxable parts, and a chart of gratuity at longer service.

When Must Gratuity Be Paid?

The employer must pay gratuity within 30 days of it becoming payable. If it is late, simple interest is due for the delay. If your employer refuses or pays less, you can apply to the controlling authority under the Code. Gratuity cannot be forfeited except for proven misconduct such as causing damage to company property or a moral turpitude offence, and only to the extent the law allows.

Gratuity is one part of your retirement savings. Combine it with your EPF corpus and NPS pension to see your full retirement picture.

Frequently Asked Questions

Sources: Code on Social Security, 2020 (Chapter V – Gratuity), in force from 21 November 2025; Payment of Gratuity Act, 1972 (repealed and merged); Income-tax exemption for gratuity (₹20 lakh limit for non-government employees); CCS (Pension) Rules for central government gratuity (₹25 lakh ceiling from 1 January 2024). Checked October 2026.