Short answer
Gratuity in India is worked out as:
Last drawn Basic + DA × 15 × years of service ÷ 26
A part-year of more than six months counts as a full year. Permanent employees need five years of continuous service; fixed-term employees qualify after one year from 21 November 2025. The amount is capped at ₹20 lakh (₹25 lakh for central government staff).
Government employees get their gratuity tax-free. For others, the lowest of the gratuity received, the formula amount and ₹20 lakh is tax-free under Section 19 of the Income-tax Act, 2025. Employers must pay within 30 days.
How to use this gratuity calculator
- 1Pick your employee typePrivate, fixed-term, piece-rated, working journalist, central government, or an employer with fewer than 10 staff. The eligibility rule for that type shows below the field.
- 2Pick the reason for leavingResignation, retirement, termination, end of contract, death or disablement. Death and disablement need no minimum service.
- 3Enter your last drawn Basic + DATick the 50% wage rule and add your gross pay if your basic is less than half of your salary.
- 4Enter your datesThe calculator counts your exact service and rounds it the way the law does. Switch to "Tax on gratuity" to split what you received into tax-free and taxable parts.
Gratuity rules at a glance, 2026
Who qualifies, the formula and the cap for each kind of employee. Filter by group or search.
| Employee | Minimum service | Formula | Cap |
|---|---|---|---|
| Permanent employee, 10+ staff | 5 years | Wages × 15/26 × years | ₹20 lakh |
| Fixed-term employee | 1 year | Wages × 15/26 × years, pro rata | ₹20 lakh |
| Working journalist | 3 years | Wages × 15/26 × years | ₹20 lakh |
| Piece-rated or daily-wage worker | 5 years | Average daily wage of last 3 months × 15 × years | ₹20 lakh |
| Seasonal establishment worker | Worked the season | 7 days' wages for each season | ₹20 lakh |
| Death or disablement (any covered employee) | None | Wages × 15/26 × years, paid to nominee or employee | ₹20 lakh |
| Employer with fewer than 10 staff | As per employer policy | Not mandatory; often half a month per completed year | Policy |
| Central government, retirement | 5 years qualifying service | ¼ of emoluments × completed six-monthly periods, up to 16½ months | ₹25 lakh |
| Central government, death in service | None | 2 to 33 times emoluments, by service slab | ₹25 lakh |
| Tax: government employees | — | Fully exempt · Sec 19, Table Sl. No. 3 & 4 | No limit |
| Tax: covered by the Code | — | Lowest of received, formula amount and ₹20 lakh · Sl. No. 5 | ₹20 lakh lifetime |
| Tax: not covered | — | Lowest of received, ½ month's average salary (last 10 months) × completed years, ₹20 lakh · Sl. No. 6 | ₹20 lakh lifetime |
| Tax: paid to nominee after death | — | Not taxable in the heirs' hands (CBDT Circular 573/1990) | No limit |
What changed under the new Labour Codes
The four Labour Codes came into force on 21 November 2025. Gratuity moved from the Payment of Gratuity Act, 1972 into Chapter V (Sections 53 to 57) of the Code on Social Security, 2020. The formula and the ₹20 lakh cap stayed the same. Two changes affect how much people get.
| Point | Before 21 Nov 2025 | From 21 Nov 2025 |
|---|---|---|
| Law | Payment of Gratuity Act, 1972 | Code on Social Security, 2020, Section 53 |
| Fixed-term employees | 5 years, same as permanent staff | 1 year, pro rata |
| Wages for gratuity | Basic + DA only | Basic + DA + retaining allowance, raised to at least 50% of total pay |
| Who is covered | Establishments with 10+ employees | Same, and stays covered if headcount later drops |
| Ceiling | ₹20 lakh | ₹20 lakh |
| Time to pay | 30 days | 30 days, with interest if late |
The 50% wage rule in one line. If HRA, conveyance, special allowance and other excluded items add up to more than half of your total pay, the excess is treated as wages. Salary structures with a low basic now produce a higher gratuity, and a higher provision in the employer's books.
Gratuity ready reckoner
Gratuity for common salaries and service lengths, using wages × 15/26 × years for employees covered by the Code.
| Basic + DA / month | 5 yrs | 10 yrs | 15 yrs | 20 yrs | 25 yrs | 30 yrs |
|---|---|---|---|---|---|---|
| ₹25,000 | ₹72,115 | ₹1,44,231 | ₹2,16,346 | ₹2,88,462 | ₹3,60,577 | ₹4,32,692 |
| ₹40,000 | ₹1,15,385 | ₹2,30,769 | ₹3,46,154 | ₹4,61,538 | ₹5,76,923 | ₹6,92,308 |
| ₹50,000 | ₹1,44,231 | ₹2,88,462 | ₹4,32,692 | ₹5,76,923 | ₹7,21,154 | ₹8,65,385 |
| ₹75,000 | ₹2,16,346 | ₹4,32,692 | ₹6,49,038 | ₹8,65,385 | ₹10,81,731 | ₹12,98,077 |
| ₹1,00,000 | ₹2,88,462 | ₹5,76,923 | ₹8,65,385 | ₹11,53,846 | ₹14,42,308 | ₹17,30,769 |
| ₹1,50,000 | ₹4,32,692 | ₹8,65,385 | ₹12,98,077 | ₹17,30,769 | ₹20,00,000* | ₹20,00,000* |
How years of service are counted
For the amount, each completed year counts, and a part-year of more than six months counts as one more year. Six months or less is dropped. Continuous service includes leave, sickness, accident, lay-off and authorised absence.
| Service | Counted as (covered) | Counted as (not covered, tax) | Qualifies? Permanent |
|---|---|---|---|
| 4 years 8 months | 5 years | 4 years | No, under 5 years |
| 5 years exactly | 5 years | 5 years | Yes |
| 7 years 6 months | 7 years | 7 years | Yes |
| 7 years 6 months 1 day | 8 years | 7 years | Yes |
| 12 years 11 months | 13 years | 12 years | Yes |
Worked examples
Last drawn Basic + DA ₹60,000. Service rounds up to 13 years.
₹60,000 × 15 × 13 ÷ 26 = ₹4,50,000, fully tax-free
Basic + DA ₹40,000. Qualifies after 1 year; the 3 months are dropped.
₹40,000 × 15 × 2 ÷ 26 = ₹46,154
Gross pay ₹1,00,000, Basic + DA ₹35,000, 8 years. Wages are raised to ₹50,000.
₹50,000 × 15 × 8 ÷ 26 = ₹2,30,769 (₹1,61,538 on basic alone)
Average salary of last 10 months ₹45,000, service 9 years 10 months, so 9 completed years.
Tax-free: ₹45,000 × ½ × 9 = ₹2,02,500 · Taxable: ₹97,500
Tax on gratuity, Tax Year 2026-27
From 1 April 2026 the gratuity exemption sits in Section 19 of the Income-tax Act, 2025 (earlier Section 10(10) of the 1961 Act). It is available under both the new and the old regime.
| Who | Tax-free amount | Section 19 Table | Old section |
|---|---|---|---|
| Central or state government employee | Entire amount | Sl. No. 3 | 10(10)(i) |
| Defence services | Entire amount | Sl. No. 4 | 10(10)(i) |
| Covered by the Code on Social Security | Lowest of: amount received; wages × 15/26 × years; ₹20 lakh less exemption used earlier | Sl. No. 5 | 10(10)(ii) |
| Not covered | Lowest of: amount received; ½ × average salary of last 10 months × completed years; ₹20 lakh less exemption used earlier | Sl. No. 6 | 10(10)(iii) |
The taxable part is added to salary and taxed at your slab rate. Your employer deducts TDS on it under Section 392. If a large gratuity pushes you into a higher slab, relief for salary received in arrears (earlier Section 89) may be available.
Gratuity for central government employees
Central government staff are paid under the Central Civil Services (Payment of Gratuity) Rules, 2021, not the Code. Emoluments means basic pay plus DA. The ceiling is ₹25 lakh from 1 January 2024.
| Qualifying service at death | Death gratuity |
|---|---|
| Less than 1 year | 2 × emoluments |
| 1 year to under 5 years | 6 × emoluments |
| 5 years to under 11 years | 12 × emoluments |
| 11 years to under 20 years | 20 × emoluments |
| 20 years or more | ½ emoluments per completed six-monthly period, up to 33 × emoluments |
Retirement gratuity is ¼ of emoluments for every completed six-monthly period of qualifying service, up to 16½ times emoluments. State governments follow their own rules, which are usually similar.
When gratuity can be withheld or forfeited
- Damage to property. If you are terminated for a wilful act or negligence that caused loss to the employer, gratuity can be forfeited up to that loss.
- Misconduct. It can be wholly or partly forfeited for riotous or disorderly conduct, violence, or an offence involving moral turpitude committed in the course of employment. The employer must have terminated you for it.
- Not for a notice period shortfall. An unserved notice period or a pending laptop return is not a legal ground to forfeit gratuity. Recoveries go through the full and final settlement.
Late payment. Gratuity is due within 30 days of becoming payable. If the employer pays late, it owes simple interest at the notified rate. You can apply to the controlling authority if it is not paid.
Frequently asked questions
How is gratuity calculated in India in 2026?
Gratuity = last drawn wages × 15 × years of service ÷ 26. Wages means basic pay, dearness allowance and retaining allowance. A part-year of more than six months counts as a full year. The amount is capped at ₹20 lakh for private sector employees. This formula now sits in Section 53 of the Code on Social Security, 2020, in force from 21 November 2025.
Can I get gratuity after 1 year of service?
Yes, if you are a fixed-term employee. From 21 November 2025 the Code on Social Security, 2020 gives fixed-term employees gratuity on a pro-rata basis once they complete one year. Permanent employees still need five years of continuous service, except on death or disablement, where there is no minimum.
Will I get gratuity if I resign after 4 years and 8 months?
Usually not. A permanent employee needs five years of continuous service, and most employers read this strictly. The rule that more than six months counts as a full year applies to the amount, not to reaching five years. A few High Court rulings have allowed gratuity where 240 days were worked in the fifth year, so take advice if you are close.
What is the maximum gratuity limit in 2026?
₹20 lakh for employees covered by the Code on Social Security, 2020, and ₹25 lakh for central government employees from 1 January 2024. An employer may pay more, but the excess is taxable salary.
Is gratuity taxable?
Gratuity of government employees is fully tax-free. For others, the tax-free part is the lowest of the gratuity received, ₹20 lakh (less any exemption used before) and the formula amount. From Tax Year 2026-27 this sits in Section 19 of the Income-tax Act, 2025, Table Sl. No. 3 to 6, earlier Section 10(10). The rest is taxed as salary.
Is gratuity exempt under the new tax regime?
Yes. The gratuity exemption is available under both the new and the old tax regime, up to the same limits.
What are wages for gratuity under the new labour codes?
Basic pay, dearness allowance and retaining allowance. If allowances left out of wages, such as HRA, conveyance, overtime and commission, add up to more than 50% of total pay, the excess is added back to wages. So gratuity is worked out on at least half of your total pay.
Within how many days must the employer pay gratuity?
Within 30 days of it becoming payable. If the employer pays late, it owes simple interest at the rate the government notifies, from the date it fell due.
Can an employer forfeit gratuity?
Only in limited cases. It can be forfeited up to the loss caused when an employee is terminated for a wilful act that damaged the employer's property. It can be wholly or partly forfeited for riotous or violent conduct, or an offence involving moral turpitude committed in the course of employment.
Is gratuity paid to a nominee or legal heir taxable?
No. Gratuity paid to the nominee or legal heirs after an employee dies is not taxable in their hands, as clarified by CBDT Circular No. 573 dated 21 August 1990.
Is gratuity payable if the company has fewer than 10 employees?
The law applies to establishments with 10 or more employees. Once covered, it stays covered even if headcount later falls below 10. Smaller employers may pay gratuity under their own policy, and the tax exemption is then limited to half a month's average salary for each completed year.
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