Gratuity calculator
Gratuity
₹2,88,462
- Wages counted
- ₹50,000 a monthBasic pay and DA.
- Service counted
- 10 years
- For each year
- ₹28,846.1515 days of wages: ₹50,000 × 15 ÷ 26.
Gratuity: basics and FAQs
What is gratuity?
Gratuity is an amount an employer pays an employee who leaves after long service: on retirement, on resignation, or when a contract ends. The employer bears the cost; nothing is deducted from pay.
The rules are in the Code on Social Security, 2020, in force since 21 November 2025. It replaced the Payment of Gratuity Act, 1972.
How is it worked out?
15 days of wages for every year of service, with a month taken as 26 working days:
Gratuity = wages × 15 ÷ 26 × years of service
wages = the last monthly wages drawn
years of service = years counted (see below)
Worked example: wages of ₹50,000 a month and 10 years of service. That is ₹50,000 × 15 ÷ 26 × 10 = ₹2,88,462.
What counts as wages?
Basic pay, dearness allowance (DA) and any retaining allowance. The excluded list has house rent allowance, conveyance, overtime, commission, bonus and the employer's provident fund contribution.
Since 21 November 2025, when the excluded items come to more than half of gross pay, the part over half is added to wages. So in most pay structures wages are at least half of gross pay.
Example: basic pay and DA of ₹30,000 in gross pay of ₹1,00,000. Half of gross pay is ₹50,000, so wages are counted as ₹50,000. For 10 years that gives ₹2,88,462; on basic pay and DA alone it was ₹1,73,077.
How are the years counted?
Completed years, and a part of a year over 6 months counts as one more. 10 years 7 months is counted as 11 years. 10 years 4 months is counted as 10 years.
What do the terms mean?
- Basic pay + DA
- Monthly basic pay and dearness allowance as last drawn.
- Gross pay
- All monthly pay before deductions, with the employer's provident fund contribution.
- Wages counted
- Basic pay and DA, or half of gross pay when that is more.
- Service counted
- Years of service after the 6-month rule.
- Limit
- ₹20,00,000. The law does not require an employer to pay more.
Frequently asked questions
Who gets gratuity?
An employee who leaves after 5 years of continuous service. The 5 years are not needed on death or disablement, or when a fixed-term contract of 1 year or more ends. On a fixed-term contract, gratuity is paid in proportion to the service. The law covers factories, mines, oilfields, plantations, ports and railway companies of any size, and shops and establishments that had 10 or more employees on any day of the last 12 months.
Is there a limit?
Yes. The law does not require an employer to pay more than ₹20,00,000. An employer may pay more under its own terms.
I have worked 4 years and 8 months. Do I qualify?
The law asks for 5 years of continuous service. The Madras High Court has counted 4 years and 240 days as 5 years. Whether that applies is for the employer or the competent authority to say. This calculator shows an amount from 5 years.
Is gratuity taxed?
For an employee of the central or a state government or a local authority it is exempt in full. For others, part of it is exempt, and how much depends on the rule that applies. Under the general rule the exempt part is at most ₹20,00,000 across a working life. The rest is taxed as salary. The calculator shows the amount before tax.
Does the calculator keep what I type?
No. The calculation runs in your browser. Nothing you type is sent or stored, or added to the page address. Sharing the calculator sends only a link to this page.
Rules checked on 13 Oct 2026.