Gratuity Calculator
What your employer owes you when you leave — under the Code on Social Security that replaced the Payment of Gratuity Act on 21 November 2025 — and how much of it is tax-free.
How it works
The formula, the 6-month rounding and the pro rata rule for fixed-term staff are in section 53 of the Code on Social Security, 2020; “wages” follow its section 2(88), including the 50% rule. The 1-year minimum for fixed-term employees and the start date come from the Labour Ministry's FAQs of 16 March 2026 and 30 December 2025. The tax-free part is section 19 (Table, Sl. 5) of the Income-tax Act, 2025 (old section 10(10)), with the ₹20 lakh limit of Notification 16/2019 carried over by its section 536.
This covers every factory, mine, plantation, port and railway company, and other shops and establishments with 10 or more employees (the Code's First Schedule). If yours isn't covered, any gratuity is up to your employer, and the tax-free part is half a month's average salary (last 10 months) per completed year, up to ₹20 lakh. Central and state government employees follow their own rules. To see how much of your CTC goes to gratuity, use the in-hand salary calculator.
Sources & further reading
Section numbers are the Income-tax Act, 2025's, with the 1961 Act's in brackets.
Law and official notices
- The Code on Social Security, 2020 (No. 36 of 2020) — Ministry of Labour & Employment, 28 Sep 2020, in force 21 Nov 2025
- FAQs on Labour Codes — Ministry of Labour & Employment, 30 Dec 2025
- Additional FAQs on Labour Codes — Ministry of Labour & Employment, 16 Mar 2026
- Income-tax Act, 2025 (No. 30 of 2025) — Gazette of India, 21 Aug 2025, in force 1 Apr 2026
Frequently asked questions
How is gratuity calculated?
15 days' wages for every year of service: last-drawn monthly wages ÷ 26 × 15 × years. A part year of more than 6 months counts as a full year. On ₹52,000 a month for 10 years that's ₹3,00,000.
When do I become eligible?
After 5 years of continuous service in a permanent job, or 1 year on a fixed-term contract, where it's paid pro rata. On death or disablement there's no minimum.
What did the Labour Codes change?
Since 21 November 2025, gratuity is worked out on "wages" as the Code on Social Security defines them: if your Basic + DA is less than half your pay, the shortfall counts as wages too. With ₹40,000 Basic on ₹1,00,000 total pay, 10 years' gratuity rises from ₹2,30,769 to ₹2,88,462.
Is there a maximum gratuity?
Yes — ₹20 lakh, the ceiling notified on 29 March 2018 (S.O. 1420(E)) and kept in force by the Code. Your employer can choose to pay more.
Is gratuity taxable?
Not up to the amount the law requires, capped at ₹20 lakh — in both the New and Old Regime (section 19 of the Income-tax Act, 2025). Anything your employer pays on top is taxed as salary at your slab rate.
Why does my CTC show gratuity if I may never get it?
Employers set aside about 4.81% of your yearly wages (15 ÷ 26 ÷ 12) for gratuity and many include it in CTC. You only receive it if you stay long enough, so it never reaches your monthly in-hand.