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Gratuity calculator India

Work out gratuity with the 15/26 formula, the six-month rounding rule, the five-year eligibility test, the Labour Code wage rule and the ₹20 lakh ceiling. Covered and non-covered employers both handled.

Last updated · Labour Codes

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Employee & salary

Last drawn monthly pay. Only basic + DA counts, unless allowances exceed half of pay.

Service

Continuous service with this employer. 5 years are needed to qualify.

Estimates only, computed in your browser. Nothing you type is sent to or stored by wHRMS. Confirm figures with your CA or the statutory portal before filing.

Understand the details

Worked example

Santhosh at Aplenix Technologies has a last drawn basic + DA of ₹40,000 and 12 years and 8 months of service; Aplenix is covered by the Act. Months exceed six, so 13 years count. Gratuity = 40,000 × 15 ÷ 26 × 13 = ₹3,00,000. It is under ₹20 lakh, so the whole amount is tax-free.

For employers: provisioning and the wage base

Gratuity is a liability that accrues every month an employee stays. Companies with more than ten employees either fund it through an insurer's group gratuity scheme or provision it in the books on an actuarial basis. Since November 2025 the wage base follows the Code on Social Security definition, so a structure that keeps basic below half of total pay no longer shrinks the gratuity base; the excess allowances are added back. Payroll software that stores basic and DA history per employee makes the last-drawn figure and the service dates a report rather than a search.

A little more detail

Frequently asked questions.

What is the gratuity formula?

For an employer covered by the Payment of Gratuity Act: last drawn (basic + DA) × 15 ÷ 26 × completed years of service. Fifteen days of wages for every year, on a 26-working-day month. Employers not covered use 30 days in the denominator.

How are part years counted?

Under the Act, more than six months in the final year counts as a full year; six months or less is dropped. For seven years and seven months the calculator uses eight years. Employers outside the Act count only completed years.

Who is eligible?

Employees who complete five years of continuous service with one employer, on resignation, retirement, superannuation or termination. The five-year rule does not apply on death or disablement. Fixed-term employees qualify after one year under the Code on Social Security, 2020.

How much gratuity is tax-free?

Up to ₹20 lakh for private-sector employees covered by the Act, cumulative across all employers in a lifetime. Government employees are exempt in full. Anything above the limit is taxed as salary at slab rate.

Is there a maximum gratuity?

Yes. For an employer covered by the Act, gratuity payable is capped at ₹20 lakh (section 4(3), raised from ₹10 lakh on 29 March 2018). If the formula gives more, the excess is not payable under the Act; an employer can still pay more under a contract or policy, and that extra is taxed as salary.

When must the employer pay?

Within 30 days of it becoming payable. Delay attracts simple interest at the rate the central government notifies.

Did the labour codes change gratuity?

The Code on Social Security, 2020 (in force from November 2025) carries the same 15/26 formula and five-year rule, adds the one-year rule for fixed-term staff, and uses the Code's wider definition of wages, which can raise the base if allowances exceed 50% of total pay.

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