Gratuity Calculator

The formula, and the three things people get wrong

Gratuity for a covered employer - under the Code on Social Security, 2020, section 53 since 21 November 2025, and the Payment of Gratuity Act, 1972 before it - is fifteen divided by twenty-six, multiplied by your last drawn basic plus dearness allowance, multiplied by your completed years of service. Twenty-six is the assumed number of working days in a month - thirty days less four Sundays - and fifteen days' wages is the statutory entitlement for each year worked.

Three errors account for almost every wrong answer. The first is using gross salary or CTC instead of basic plus DA, which inflates the result by roughly two and a half times. The second is using 15/30 for a covered employer, which understates it by about thirteen per cent. The third is mishandling the part-year.

The six-month rounding applies only to covered employers

If your employer is covered by the Act, a part-year of six months or more rounds the year up. Six years and six months counts as seven; six years and five months counts as six. If your employer is not covered - fewer than ten employees - there is no rounding up at all, and the formula uses 15/30 on the average of your last ten months' salary rather than the last drawn figure.

• Covered: 15/26 × last drawn basic + DA × completed years, part-year of six months or more rounds up
• Not covered: 15/30 × average of last ten months × completed years, no rounding up
• Five years of continuous service is normally required, waived on death or disablement
• A fixed-term employee qualifies after 1 year, paid pro rata
• The statutory exemption cap applies to the tax-free portion, not to what can be paid

What the labour codes changed

The formula survived the move intact; two rules are new. A fixed-term employee is eligible after one year of service under the contract rather than five, paid pro rata, with a further part-year of six months or more rounded up.

And wages now have a floor. Allowances excluded from wages - HRA, conveyance, commission and the like - that exceed 50% of your total pay are added back, so a structure with basic under half of pay has a larger gratuity base than basic plus DA - enter your total monthly pay to model it.

The cap limits the exemption, not the payment

The statutory ceiling is a limit on how much gratuity is exempt from tax, not on how much your employer may pay you. An employer is free to pay more, and many do; the excess is simply added to your salary income and taxed at your slab rate. A calculator that caps the payable figure rather than the exempt figure gets this backwards.

The exemption now sits in section 19 of the Income-tax Act, 2025 (formerly 10(10)). The ₹20,00,000 ceiling used here is carried forward from the 1961-Act notification; no fresh notification under the 2025 Act has been found.

What it will not do

It will not tell you whether you are entitled to gratuity. Eligibility turns on continuous service as defined by the Code and on your employer's coverage. We compute the formula and show you the eligibility threshold as a note, because someone at four years and seven months is asking precisely because they are deciding whether to stay.

It also does not model leave encashment or the separate rules for government employees, who are fully exempt.