Mera Hisab
What is gratuity?
Gratuity is a lump sum your employer pays when you leave a job after several years, retire, or if service ends because of death or disablement. Since 21 November 2025 it is governed by the Code on Social Security, 2020 (one of the four new labour codes), which replaced the Payment of Gratuity Act, 1972. It applies to factories, shops and other establishments with 10 or more employees.
How gratuity is calculated
Gratuity = Last monthly wages × 15 ÷ 26 × Years of service
- 15 ÷ 26: 15 days' wages for each year, taking a month as 26 working days.
- Wages: basic pay + dearness allowance (DA) of the last month.
- Years: completed years, plus one more if the extra part is more than six months. So 5 years 7 months counts as 6 years, but 5 years 6 months counts as 5.
Examples
| Last basic + DA | Service | Years counted | Gratuity |
|---|---|---|---|
| ₹30,000 | 5 years | 5 | ₹86,538 |
| ₹30,000 | 5 years 7 months | 6 | ₹1,03,846 |
| ₹50,000 | 10 years | 10 | ₹2,88,462 |
| ₹75,000 | 20 years | 20 | ₹8,65,385 |
| ₹1,00,000 | 25 years | 25 | ₹14,42,308 |
| ₹1,50,000 | 25 years | 25 | ₹20,00,000 (limit; the formula gives ₹21,63,462) |
What changed under the new labour codes
- The 50% wages rule. Allowances (such as HRA and special allowance) can make up at most half of your total pay. If they are more, the extra is counted as wages. Example: with a total pay of ₹1,00,000 and basic + DA of ₹30,000, wages are taken as ₹50,000, so 10 years' gratuity rises from ₹1,73,077 to ₹2,88,462. Enter your total pay above to apply this.
- Fixed-term employees get gratuity after one year of service (pro rata), instead of five.
- The ₹20 lakh ceiling continues: the law does not require more, though an employer may choose to pay extra.
How the new rules apply to service before 21 November 2025, and how a fixed-term contract's part-year is counted, can depend on your employer's policy and the final rules, so confirm the figure with your HR department.
Is gratuity taxable?
- Central and state government employees: fully tax-free.
- Other employees: tax-free up to ₹20 lakh over your whole career (Schedule II of the Income-tax Act, 2025, earlier section 10(10) of the 1961 Act). Anything above is added to your salary income.
Frequently asked questions
Who gets gratuity?
Employees of an establishment with 10 or more workers who have completed 5 years of continuous service (1 year for fixed-term contracts), or whose service ends because of death or disablement, in which case no minimum service applies.
I have worked 4 years 8 months. Will I get gratuity?
The rule is 5 years of continuous service, so usually not. Some courts have counted service very close to five years, and some employers are more generous, so ask your HR department.
Is gratuity calculated on basic salary or gross salary?
On wages: basic pay plus dearness allowance. Under the new labour codes, if your allowances are more than half your total pay, the extra is also counted as wages.
What is the maximum gratuity?
₹20 lakh under the law. An employer can pay more, but only up to ₹20 lakh is tax-free for private-sector employees.
Is the information I enter saved anywhere?
No. The calculation happens entirely in your browser. Nothing you enter is sent to our server or stored.