Gratuity Calculator
Enter when you joined and left, your last basic and DA and the rest of your pay, and the calculator works out the gratuity the law requires — counting the service the way the Code counts it, using the wage base the Code defines, applying the ceiling or the employer’s better terms — then splits it into the exempt and taxable parts and says what to do: when it must be paid, what interest late payment carries, when the employer can withhold it, and the relief you can claim on the taxable part.
Code on Social Security, 2020, Chapter V (sections 53–58), in force from 21 November 2025 — the Payment of Gratuity Act, 1972 numbers are named alongside · Income-tax Act, 2025, section 11 with Schedule II (formerly 10(10)) · reviewed 2026-09-14
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Gratuity rules in India 2026 at a glance
The Payment of Gratuity Act, 1972 is subsumed in Chapter V of the Code on Social Security, 2020 from 21 November 2025. The rules the calculator applies, by section.
| Rule | What it says | Section |
|---|---|---|
| Who is covered | Every factory, mine, oilfield, plantation, port, railway, shop or establishment with 10 or more employees on any day of the preceding twelve months | Section 53 with the First Schedule (section 1(3) of the 1972 Act) |
| Eligibility | 5 years of continuous service; 3 for working journalists; not needed on death or permanent disablement; fixed-term employees pro rata after 1 year | section 53(1) of the Code on Social Security, 2020 (section 4(1) of the 1972 Act); Industrial Relations Code, section 2(o) |
| Continuous service | 240 days in a year (190 below ground or where the establishment works fewer than six days a week); leave, lay-off, strike not the employee’s fault and maternity leave count | section 54 of the Code (section 2A of the 1972 Act) |
| Formula | 15 days’ wages for every completed year or part beyond 6 months; a month is 26 days; 7 days a season for seasonal work; piece-rated on the 3-month average | section 53(2) (section 4(2) of the 1972 Act) |
| Wages | Basic, dearness allowance and retaining allowance; other components above 50% of total pay are added back | section 2(88) of the Code (section 2(s) of the 1972 Act) |
| Ceiling | ₹20,00,000 as notified; better terms under a contract, award or scheme prevail | section 53(3) (section 4(3) of the 1972 Act); section 53(5) (section 4(5) of the 1972 Act) |
| Payment | Within 30 days of falling due; simple interest at the notified rate (10% a year) for delay | section 56 (section 7 of the 1972 Act) |
| Forfeiture | wilful omission or negligence causing damage or loss to the employer’s property — to the extent of the loss; termination for riotous or disorderly conduct or violence; termination for an offence involving moral turpitude committed in the course of employment | section 53(6) (section 4(6) of the 1972 Act) |
| Nomination and insurance | Nomination after one year of service; employers insure the liability or maintain an approved fund (own fund allowed at 500+ employees) | section 55 (section 6 of the 1972 Act); section 57 (section 4A of the 1972 Act) |
| Income tax | Government employees exempt in full; others the least of the amount received, ₹20,00,000 (lifetime) and the formula amount — half a month’s average salary of the last 10 months per completed year outside the Code; available under both regimes | section 11 read with Schedule II of the Income-tax Act, 2025 (section 10(10) of the 1961 Act) |
| Government employees | Retirement gratuity of ¼ of emoluments per completed six months, at most 16.5 times and ₹25,00,000; death gratuity on its own scale | Central Civil Services (Pension) Rules, 2021, rule 45 |
Gratuity: the questions people ask
What is the gratuity formula in India in 2026?
Gratuity = last drawn wages (basic + dearness allowance) × 15 ÷ 26 × completed years of service, with a part of a year beyond six months counted as a full year (section 53(2) of the Code on Social Security, 2020). Employees of seasonal establishments get 7 days’ wages a season. The ceiling is ₹20 lakh, unless the employer’s scheme or contract pays more.
Who is eligible for gratuity — is 5 years of service still required?
Yes for the general rule: five years of continuous service with an establishment of 10 or more employees. It is waived on death or permanent disablement; a working journalist qualifies after three years; and a fixed-term employee is paid pro rata once the contract has run one year (Industrial Relations Code, 2020, section 2(o)). Some High Courts have treated four years and 240 days as five years; the Code does not say so.
Is gratuity taxable in 2026, and what is the exemption limit?
Government employees: fully exempt. Everyone else: the least of the gratuity received, ₹20 lakh (a lifetime aggregate across employers) and the statutory formula amount is exempt under section 11 read with Schedule II of the Income-tax Act, 2025 (section 10(10) of the 1961 Act); the balance is taxed as salary. The exemption is available under both the old and the new tax regime.
What changed in gratuity rules under the new labour codes?
From 21 November 2025 the Payment of Gratuity Act, 1972 is subsumed in Chapter V of the Code on Social Security, 2020. Two changes matter for the amount: fixed-term employees earn gratuity pro rata after one year instead of five, and the new wage definition counts allowances beyond 50% of total pay as wages, which raises the base for employees with a low basic. The formula, the five-year rule for permanent staff and the ₹20 lakh ceiling continue.
How is gratuity calculated on a CTC with a low basic salary?
Only basic pay, dearness allowance and retaining allowance are wages for gratuity — HRA, conveyance, bonus and the rest are excluded — but if those excluded components exceed half of total pay, the excess is added back (section 2(88) of the Code). On a ₹1.5 lakh CTC with ₹60,000 basic, wages for gratuity are ₹75,000, not ₹60,000.
When must the employer pay gratuity, and what if it is late?
Within 30 days of it becoming payable — the last working day, or the date of death or disablement (section 56 of the Code; section 7 of the 1972 Act). Late payment carries simple interest at the notified rate, 10% a year under the notification carried from the 1972 Act. The employee applies in writing; a late application does not defeat the claim.
Can an employer forfeit gratuity?
Only for wilful damage to the employer’s property (to the extent of the loss), or termination for riotous or violent conduct or an offence involving moral turpitude in the course of employment (section 53(6)). Resignation, redundancy or termination for poor performance forfeits nothing.
Is gratuity paid on resignation?
Yes. Resignation after five years of continuous service is a termination that attracts gratuity in the same way as retirement; the notice period counts as service.
See also the CTC to in-hand calculator, which shows where gratuity sits in a pay structure, the advance income tax calculator for the year the taxable part lands in, the regime guide for the slab that prices it, or all calculators.
Quoting this calculator?
You are welcome to use these figures in an article, a forum answer or a client note. A link back is all I ask — here it is, ready to paste.