Gratuity Calculator
Calculate the gratuity you will receive from your last salary and years of service, and how much of it is tax-free.
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Gratuity is the lump sum an employer pays when you leave after long service, based on your basic pay plus DA and years of service. This calculator covers three cases: employers bound by the Code on Social Security, 2020, central government staff under the CCS (Pension) Rules, and smaller employers outside the law. Use it to check a full-and-final settlement or time your resignation.
The 15/26 rule and what counts as wages
Section 53 of the Code on Social Security, 2020, which replaced the Payment of Gratuity Act, 1972 on 21 November 2025, sets the rate at 15 days' wages for every completed year of service, with a month treated as 26 working days:
Gratuity = last monthly wages × 15 ÷ 26 × years counted
"Wages" means basic pay, dearness allowance and any retaining allowance. The Code adds a check, which the result notes: if your other allowances make up more than half of total pay, the excess is added back to wages. With ₹1,00,000 total pay and ₹40,000 basic plus DA, the ₹60,000 of allowances exceeds half of pay by ₹10,000, so the wage to enter is ₹50,000.
Filling in the five fields
- Monthly basic + DA (₹): last drawn, or the 10-month average if not covered: your last monthly wage, including any add-back, unless the employer is not covered.
- Completed years of service and Extra months (0–11): years cannot be left blank. With a covered employer, 7 or more extra months add a full year, but exactly six do not, so enter 7 if you are even a few days past six months.
- Employer: the law covers every factory, mine, oilfield, plantation, port and railway company, and every shop or establishment that had 10 or more employees on any day in the previous 12 months.
- Sector: "Central government (CCS Pension Rules)" switches to that formula and ignores the Employer choice. State government, railway and defence staff have their own rules, not modelled here.
Worked example: what two extra months are worth
Take a last drawn wage of ₹65,000 and 7 years 8 months with a covered employer. The 8 months round up, so 8 years count. 65,000 × 15 ÷ 26 = ₹37,500 for each year, and 37,500 × 8 = ₹3,00,000. Had you left at exactly 7 years 6 months, only 7 years would count and the gratuity would be ₹2,62,500, so check your exit date before resigning.
| Inputs | Service counted | Result |
|---|---|---|
| ₹50,000, 10 years, covered | 10 years | ₹2,88,462 payable |
| ₹65,000, 7 years 8 months, covered | 8 years | ₹3,00,000 payable |
| ₹65,000 average, 7 years 8 months, not covered | 7 years | ₹2,27,500 maximum tax-free |
| ₹65,000, 7 years 8 months, central government | 15 half-years | ₹2,43,750 payable |
| ₹1,60,000, 24 years 9 months, covered | 25 years | ₹20,00,000 payable (formula ₹23,07,692) |
The ₹20 lakh limits on payout and tax
The Code caps the gratuity an employer must pay at a notified amount, currently ₹20 lakh. The calculator applies that cap and shows a higher formula amount on a separate line, as in the last table row. An employer may pay the extra ₹3,07,692 under its own policy, but it is taxable.
The tax exemption under Section 10(10), now a deduction under section 19 of the Income-tax Act, 2025, is limited to ₹20 lakh for non-government employees. It is a lifetime limit, so tax-free gratuity from an earlier job reduces it; the tool's "Tax-free portion" assumes none was used. Anything above it is taxed as salary under either regime. Central and state government employees pay no tax on gratuity.
Employers outside the law need not pay gratuity. If yours does, the tax-free part is the lowest of the amount received, ₹20 lakh, and half a month's average salary over the last 10 months for each completed year, ignoring part-years. "Not covered" shows that last figure, capped at ₹20 lakh, as "Maximum tax-free gratuity (if your employer pays one)".
Central government gratuity under the CCS rules
Rule 45 of the CCS (Pension) Rules, 2021 pays a quarter of your emoluments (basic pay plus DA) for each completed six-month period of qualifying service, up to 16½ times emoluments (reached after 33 years), once you have five years of qualifying service. The ceiling rose from ₹20 lakh to ₹25 lakh from 1 January 2024, when DA reached 50%, and the amount is fully tax-free. At ₹1,60,000 and 33 years the formula gives ₹26,40,000, capped at ₹25,00,000.
The rules also count three or more leftover months as another half-year, and so does the tool: ₹80,000 with 24 years 9 months counts 50 periods and gives ₹10,00,000.
Who qualifies and when the money is due
- Five years of continuous service is needed when you resign, retire or are let go. Below that, the tool still shows an amount with a reminder.
- The five-year condition is waived on death or disablement, and on death the amount goes to your nominee or legal heirs.
- Fixed-term employees qualify after one year of the contract and are paid pro rata.
- Payment is due within 30 days of gratuity becoming payable.
- Seasonal workers (7 days' wages per season) and piece-rated workers follow methods this tool does not cover.
Offer letters often show gratuity inside CTC at 4.81% of basic, the same rule spread over 12 months. The In-Hand Salary Calculator removes it from CTC, and the EPF Calculator projects the provident fund you collect alongside it. The figures here are estimates, not legal or tax advice.