Gratuity Calculator

Eligibility now splits by employment type

Permanent employees still need 5 years of continuous service before gratuity becomes payable — resignation, retirement, superannuation, or termination (other than for misconduct) all qualify once that threshold is crossed. This 5-year rule is waived entirely in case of death or disablement, where gratuity is payable regardless of tenure and is paid to the nominee or legal heir.

Fixed-term and contract employees are different under the Code on Social Security: gratuity vests after just 1 year of service, not 5. This is a genuine change from the pre-Codes position, and a tool that only offers the 5-year rule will materially understate what's owed to a fixed-term employee who has completed between 1 and 5 years.

The formula depends on whether the establishment is covered

For establishments covered under the Payment of Gratuity Act, the formula is last-drawn wages × 15/26 × completed years of service — 15 days of wages per year, using 26 as the working-days-in-a-month convention. Establishments NOT covered under the Act use 15/30 instead, which produces a lower figure for the same wage and tenure. Seasonal establishments use a different formula again: 7 days' wages per season.

A final year with more than 6 months of service rounds UP to a full year for the qualifying-years count; 6 months or less is disregarded entirely. This rounding rule is the single most common point where an employee and employer's hand-calculated figures disagree.

The wage base has expanded — this is the biggest change under the Codes

Under the Code on Wages, allowances excluded from 'wages' (HRA, conveyance, special allowance, overtime, etc.) cannot exceed 50% of total remuneration — where they do, the excess is added back into wages. Gratuity is computed on this EXPANDED wage base, not on basic pay alone. For an employee whose salary structure previously kept a large share in excluded allowances, this can meaningfully increase the gratuity payout compared to a basic-only calculation — the exact same tenure and last-drawn CTC now produces a higher figure.

Tax exemption under Section 10(10)

For private sector employees covered under the Act, exemption is available up to the least of: the actual gratuity received, ₹20,00,000 (the current statutory ceiling), or the amount computed under the statutory formula. Government employees receive full exemption regardless of amount. Any amount received above the exempt limit is taxable as salary income in the year of receipt, and TDS may apply depending on the employer's payroll process.

Frequently asked questions