Free tools by Finaccle
Gratuity Calculator
Estimate the gratuity you will receive on leaving your job, using the wage rules under the Code on Social Security, 2020.
How gratuity is calculated
For employers covered by the law, gratuity is 15 days’ wages for every completed year of service: last drawn monthly wages × 15 × years of service ÷ 26. A part year of more than six months counts as a full year. For example, ₹40,000 a month with 8 years and 7 months of service gives ₹40,000 × 15 × 9 ÷ 26 = ₹2,07,692.
What the new labour codes changed
From 21 November 2025, wages include basic pay, dearness allowance and retaining allowance, and if allowances such as HRA and special allowance exceed 50% of total pay, the excess is added back to wages. This raises gratuity for many employees with a low basic salary. Fixed-term employees now qualify after one year of service, on a pro-rata basis.
Frequently asked questions
Who is eligible for gratuity?
Permanent employees qualify after five years of continuous service, and fixed-term employees after one year. The minimum service does not apply if employment ends because of death or disablement.
Is gratuity taxable?
Gratuity received by government employees is fully tax-free. For private-sector employees, up to ₹20 lakh received in a lifetime is tax-free, and anything above that is taxed as salary.
What if my employer is not covered by the gratuity law?
Employers with fewer than 10 employees are not required to pay gratuity. If they pay it voluntarily, the tax-free amount is worked out on 15 days’ average salary of the last 10 months for each completed year, divided by 30.
Need a hand? PF and ESI registration and returns or book a free consultation with our CA-led team.