Gratuity calculator · India 2026
Gratuity Calculator 2026: How Much Gratuity Will You Get?
By Pratik Bajoria, Chartered Accountant & NISM-certified Research Analyst · Last reviewed 7 Oct 2026 by Pratik Bajoria, CA · Reflects the Code on Social Security, 2020 (in force 21 Nov 2025)
When clients ask me about gratuity, the question is almost never the formula. It's “Should I resign now or wait three more months?” That timing question is worth real money, so this page starts there.
The rule is simple. You get 15 days' wages for every year of service, with a month counted as 26 working days. Permanent staff need five years of continuous service. Since 21 November 2025, the Code on Social Security, 2020 has replaced the Payment of Gratuity Act, 1972, and fixed-term staff qualify pro-rata after one year.
Estimated gratuity (15/26 formula)
₹2.9 L
Gratuity formula with example
Gratuity = (15 × last drawn monthly wages × years of service) ÷ 26
- Wages = basic + dearness allowance (+ retaining allowance), with the 50% rule below
- 26 = working days in a month; 15 = days' wages per year
- Years = completed years, +1 if the extra part exceeds six months
Illustration: your basic + DA is ₹50,000 and you've put in 10 years 7 months. The extra 7 months is more than six, so you're paid for 11 years. 15 × 50,000 × 11 ÷ 26 = ₹3,17,308. Leave at 10 years 5 months instead and you're paid for 10 years, which is ₹2,88,462. That's ₹28,846 for waiting two months.
Gratuity rules 2026: what changed under the labour codes
| Rule | Payment of Gratuity Act, 1972 | Code on Social Security, 2020 (from 21 Nov 2025) |
|---|---|---|
| Eligibility — permanent staff | 5 years' continuous service | 5 years (unchanged) |
| Eligibility — fixed-term staff | 5 years | Pro-rata after 1 year |
| Wage base | Basic + DA | Basic + DA + retaining allowance; excluded allowances above 50% of pay added back |
| Formula | 15/26 × wages × years | 15 days' wages per year (Government may notify otherwise) |
| Payment ceiling | ₹20 lakh in the statute | As notified by the Central Government |
Sources: Code on Social Security, 2020 (Section 53) and the Government's labour-code implementation announcements of November 2025. Tax treatment is governed separately by the Income-tax law.
Gratuity table by salary and years of service
Gratuity on the 15/26 formula (before tax), completed years:
| Basic + DA / month | 5 yrs | 10 yrs | 15 yrs | 20 yrs | 25 yrs | 30 yrs |
|---|---|---|---|---|---|---|
| ₹25,000 | ₹72,115 | ₹1,44,231 | ₹2,16,346 | ₹2,88,462 | ₹3,60,577 | ₹4,32,692 |
| ₹50,000 | ₹1,44,231 | ₹2,88,462 | ₹4,32,692 | ₹5,76,923 | ₹7,21,154 | ₹8,65,385 |
| ₹75,000 | ₹2,16,346 | ₹4,32,692 | ₹6,49,038 | ₹8,65,385 | ₹10,81,731 | ₹12,98,077 |
| ₹1,00,000 | ₹2,88,462 | ₹5,76,923 | ₹8,65,385 | ₹11,53,846 | ₹14,42,308 | ₹17,30,769 |
| ₹2,00,000 | ₹5,76,923 | ₹11,53,846 | ₹17,30,769 | ₹23,07,692 | ₹28,84,615 | ₹34,61,538 |
Amounts above ₹20 lakh are taxable for non-government employees (for example ₹2 lakh wages × 30 years).
Chart: effect of the 50% wage rule
Tax on gratuity (FY 2026-27)
| Employee type | Tax-free amount |
|---|---|
| Central / state government employee | Fully exempt |
| Private sector employee | Least of actual gratuity, statutory formula amount and ₹20 lakh (lifetime, across employers) |
| Gratuity received while still employed | Taxable as salary |
The excess over the exemption is added to salary in the year received and taxed at your slab rate — use the income tax calculator or the old vs new regime calculator. If a large gratuity lifts arrears into a higher bracket, relief under the salary-arrears provision may be available; ask a tax professional.
The mistake I see most often
People calculate gratuity on their CTC or gross salary. It isn't. It's on basic + DA (plus retaining allowance), and on many offer letters basic is 30–40% of pay. A ₹1.2 lakh-a-month engineer with ₹40,000 basic who plans a home down payment around “15 days of my salary per year” is overestimating by a factor of three. Pull your payslip, not your offer letter.
The second one: forgetting the ₹20 lakh tax exemption is a lifetime limit across all employers, not per job. If you took ₹8 lakh tax-free from your last company, only ₹12 lakh is left for the rest of your career.
What to do with your gratuity
- Between jobs: top up your emergency fund first.
- At retirement: add it to your EPF and NPS corpus and plan income with the SWP calculator.
- Investing a lumpsum for later goals: see the lumpsum calculator, and check costs with the direct vs regular calculator.
Frequently asked questions
What is the gratuity formula in India?
Gratuity = 15 × last drawn monthly wages × years of service ÷ 26. Wages are basic pay plus dearness allowance (and retaining allowance). 15 days' wages are paid for every completed year, and a final part-year of more than six months counts as a full year. For ₹50,000 wages and 10 years 7 months: 15 × 50,000 × 11 ÷ 26 ≈ ₹3,17,308.
After how many years is gratuity paid?
Permanent employees qualify after five years of continuous service (the condition does not apply on death or disablement). Under the Code on Social Security, 2020, in force from 21 November 2025, fixed-term employees qualify on a pro-rata basis after one year of continuous service.
Is 4 years 7 months counted as 5 years for gratuity?
Courts have taken differing views on whether 4 years and 240 days counts as five years of continuous service, and practice varies by employer. Do not plan around it; ask your HR team how they apply it. The six-month rounding in the formula applies to the calculation once you are eligible.
How much gratuity is tax-free?
For non-government employees, gratuity is exempt up to a lifetime limit of ₹20 lakh across all employers; anything above is taxed as salary in the year received. Gratuity received by central and state government employees is fully exempt. The labour-law payment ceiling is separate and is now set by Central Government notification under the Code.
How does the new labour code change my gratuity?
From 21 November 2025, 'wages' for gratuity include basic, DA and retaining allowance, and if excluded allowances exceed 50% of total remuneration the excess is added back to wages. If your basic + DA was well below half your pay, your gratuity base rises. Illustration: ₹1 lakh monthly pay with ₹30,000 basic → wages treated as at least ₹50,000, lifting 10-year gratuity from about ₹1,73,077 to about ₹2,88,462.
Educational tool only — not investment, tax or legal advice. Figures are formula-based illustrations using the stated assumptions; actual outcomes depend on notified rates, rules and your specific facts. Verify with official sources or a qualified professional before acting. Findost (findost.io) and PaisaGuru by Findost are not affiliated with Findoc, FinDost, or other similarly named brands. PaisaGuru is the AI wealth concierge of Findost.