Gratuity Calculator: Formula, Eligibility and Tax
Gratuity is 15 days' wages for each year of service, a day's wage being a month's wages ÷ 26. On last wages of ₹30,000 a month (basic + DA), 10 years of service gives ₹1,73,077.
Gratuity due
—
| Wages a month | |
|---|---|
| For each year (15 ÷ 26 × wages) | |
| Years counted | |
| Gratuity | |
| Tax-free (up to ₹20 lakh) | |
| Taxable as salary |
For employees covered by the gratuity law. Your employer may pay more under its own scheme, but not less.
Gratuity by wages and years of service
Last monthly wages (basic pay + DA) × 15 ÷ 26 × years.
| Years of service | Wages ₹30,000 a month | Wages ₹50,000 a month |
|---|---|---|
| 5 years | ₹86,538 | ₹1,44,231 |
| 7 years | ₹1,21,154 | ₹2,01,923 |
| 10 years | ₹1,73,077 | ₹2,88,462 |
| 15 years | ₹2,59,615 | ₹4,32,692 |
| 20 years | ₹3,46,154 | ₹5,76,923 |
How it's calculated
- Wages = your last monthly basic pay plus dearness allowance. If you enter total pay, wages are at least 50% of it.
- Years counted = completed years of service, plus one more if the part year left over is more than six months. Service counts both your joining day and your last working day.
- Gratuity = 15 ÷ 26 × wages × years counted.
- You qualify after 5 completed years of continuous service, or 1 year on a fixed-term contract. There is no minimum when employment ends because of death or disablement.
- Up to ₹20 lakh of gratuity in your working life is tax-free for private-sector employees; the rest is taxed as salary.
Rules: the Code on Social Security, 2020, one of the labour codes in force from 21 November 2025. It keeps the 15/26 formula of the Payment of Gratuity Act, 1972, and adds the one-year rule for fixed-term employees and the 50% wage rule.
Frequently Asked Questions
How is gratuity calculated?
Gratuity = 15 ÷ 26 × last monthly wages (basic pay + DA) × years of service. On wages of ₹30,000 a month and 10 years of service: 15 ÷ 26 × 30,000 × 10 = ₹1,73,077. The 26 stands for the working days in a month, so 15 ÷ 26 × wages is 15 days' pay for each year.
How many years of service do I need to get gratuity?
5 years of continuous service with the same employer. Under the labour codes in force from 21 November 2025, a fixed-term employee qualifies after 1 year (on wages of ₹30,000, one year gives ₹17,308). If employment ends because of death or disablement, there is no minimum service.
Does 7 years and 7 months count as 8 years?
Yes. A part year of more than six months counts as a full year, so 7 years 7 months counts as 8 years. On wages of ₹30,000 that is ₹1,38,462 instead of ₹1,21,154 for 7 years. Six months or less is dropped: 7 years 6 months counts as 7 years.
What counts as wages for gratuity?
Basic pay plus dearness allowance. Under the labour codes, wages must be at least 50% of your total pay: if allowances make up more than half, the excess counts as wages. With basic pay of ₹20,000 and total pay of ₹60,000 a month, gratuity is worked out on ₹30,000, so 10 years gives ₹1,73,077 instead of ₹1,15,385.
Is gratuity taxable?
For private-sector employees, gratuity up to ₹20 lakh is tax-free. The limit counts all the gratuity you receive in your working life, from every employer. Anything above it is taxed as salary in the year you receive it.
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