Gratuity Calculator
Estimate gratuity from current wages and service under India's current labour-code rules. Check eligibility, the 15/26 formula, the wage add-back, future value and potential tax treatment.
Last Updated: July 22, 2026Calculate Gratuity in India
The default example uses ₹40,000 monthly statutory wages and 10 years of service. Current maximum statutory gratuity is ₹20 lakh.
Enter valid figures and select Calculate Gratuity.
| Scenario | Monthly statutory wage | Service at exit | Formula amount | Amount after ceiling | Value in today's money |
|---|
This tool estimates the central statutory formula for a monthly-rated employee. Employer records, establishment coverage, continuous service, employment terms, the applicable government, better contractual benefits and case-specific tax rules determine the final amount.
What Is a Gratuity Calculator?
A gratuity calculator estimates the lump-sum employment benefit linked to your last-drawn wages and continuous service. For a monthly-rated employee covered by India's current gratuity provisions, the standard formula grants 15 days' wages for every completed year of service or part exceeding six months. The result is subject to the maximum amount notified by the Central Government.
India's four labour codes became effective on November 21, 2025. Gratuity is now governed by Chapter V of the Code on Social Security, 2020. The revised wage definition also applies from that date. This matters because the wage used for gratuity may exceed Basic Pay plus Dearness Allowance when excluded allowances cross 50% of remuneration.
This calculator applies the 15/26 formula, checks the five-year or one-year eligibility rule, handles pro-rata service for fixed-term expiry and death or disablement, applies the current ₹20 lakh statutory ceiling and compares the payout with a simplified tax-exemption limit. It also projects the benefit after future wage growth and service.
How to Use This Gratuity Calculator
- Select regular retirement, resignation or superannuation, fixed-term contract expiry, or death or disablement.
- Enter monthly Basic Pay, eligible Dearness Allowance and retaining allowance in the first pay field.
- Add other fixed remuneration subject to the 50% wage test. Do not include reimbursements, ESOPs or variable performance incentives.
- Keep the Code wage option to apply the current 50% add-back rule. Use direct wage only when payroll has already supplied the final statutory wage.
- Select the tax category matching the employee. A non-covered employee uses a different tax-exemption formula.
- Enter completed service years and extra months. Do not round the months yourself.
- Add the actual gratuity offered when you want to test its taxable portion. Keep zero to use the tool's formula estimate.
- Enter future service, wage growth and inflation to view a retirement or exit projection.
- Select Calculate Gratuity and compare the result with the employer's calculation sheet.
Gratuity Formula Under the Current Code
For a monthly-rated employee, Section 53 of the Code on Social Security, 2020 specifies 15 days' wages for each completed year of service or part exceeding six months. The monthly-rate explanation divides last-drawn monthly wages by 26 and multiplies the result by 15.
Monthly-rated employee formula
Gratuity before ceiling = Last-drawn monthly wages × 15 ÷ 26 × eligible service years
Gratuity payable = Lower of the formula amount and the notified maximum
For regular retirement, resignation or superannuation, an extra period of exactly six months does not round up. Seven to eleven extra months count as one additional year. Fixed-term and deceased-employee gratuity is calculated on a pro-rata basis, so the calculator uses years plus months divided by 12 for those categories.
Worked example
Suppose last-drawn monthly statutory wages are ₹40,000 and eligible service is 10 years. The estimate is ₹40,000 × 15 ÷ 26 × 10 = ₹2,30,769. This is below the ₹20 lakh ceiling, so the estimated statutory gratuity remains ₹2,30,769.
What Counts as Wages for Gratuity?
The current definition starts with Basic Pay, Dearness Allowance and retaining allowance, if any. When excluded allowances and benefits subject to the wage test exceed 50% of remuneration, the excess is added back to wages for statutory purposes. In a simplified pay structure, this means statutory wages cannot fall below half of the remuneration included in the test.
Example: Basic + DA is ₹40,000 and other fixed allowances are ₹60,000, making tested remuneration ₹1,00,000. The allowances exceed half of remuneration by ₹10,000. The calculator adds ₹10,000 back, producing statutory wages of ₹50,000.
The official FAQs state that variable performance incentives, ESOPs and reimbursement-based payments do not form part of wages. Employer PF or pension contributions and other statutory components need payroll-level classification. Because salary structures differ, use the direct-wage option when your employer has supplied the final Code wage.
Gratuity Eligibility Rules in 2026
| Exit event | Minimum service | Service calculation | Key point |
|---|---|---|---|
| Retirement, resignation or superannuation | Normally five years | Completed years, plus one when extra service exceeds six months | Continuous service rules apply |
| Fixed-term contract expiry | One year from contract start | Pro-rata | Applies to employees directly engaged on fixed-term employment |
| Death or disablement | No five-year minimum | Pro-rata | Payment goes to the eligible person, nominee or legal heirs as applicable |
The Ministry of Labour and Employment's March 2026 labour-code FAQs clarify that a fixed-term employee qualifies after rendering one year of service from the start of the contract. An 11-month fixed-term employee does not meet this one-year condition. Contract labour hired through a contractor is not automatically treated as direct fixed-term employment of the principal employer.
Continuous service includes several protected interruptions. The Code also contains deemed-service tests based on days worked. Payroll and legal records should decide borderline cases. The calculator uses the years and months you enter and does not attempt to prove continuous service.
Gratuity Ceiling and Better Employer Terms
The current maximum gratuity notified by the Central Government is ₹20 lakh. The calculator applies this ceiling to the statutory estimate. It does not assume a separate employer cap or an unlimited contractual benefit.
The Code protects an employee's right to better gratuity terms under an award, agreement or employment contract. An employer may therefore pay more than the statutory formula or ceiling. Enter the actual amount paid or offered to test the simplified tax result. The amount above the eligible tax deduction may still be taxable even when the employer validly pays a higher benefit.
Gratuity should generally be paid within 30 days after it becomes payable. Nomination, employer determination, competent-authority procedure, interest for delay and forfeiture involve separate rules. This calculator does not decide a claim or dispute.
Gratuity Tax Exemption in Tax Year 2026-27
The Income-tax Act, 2025 applies from April 1, 2026. Section 19 provides deductions from salary for eligible gratuity. The calculator uses three simplified categories.
- For a covered non-government employee, the deduction is limited to the actual gratuity, the statutory formula amount and the applicable notified ceiling.
- For another non-government employee not covered by the statutory formula, the deduction is the lowest of actual gratuity, the notified ceiling and half of the average salary of the last 10 months multiplied by completed service years.
- Eligible death-cum-retirement gratuity for specified government employees is fully deductible under the applicable rules.
For the non-covered formula, salary includes Dearness Allowance only when the employment terms include it for retirement benefits and excludes other allowances and perquisites. This calculator uses the entered Basic + DA field as a proxy for the required 10-month average. Replace it with the correct average before relying on the result.
The ₹20 lakh tax limit is cumulative across eligible gratuities from one or more employers, reduced by relevant exemption or deduction already used in earlier years. The tool does not track earlier receipts. Its tax output multiplies the estimated taxable portion by your entered marginal rate and excludes surcharge, cess, relief, regime interaction and return-level adjustments.
Future Gratuity Projection
Gratuity depends heavily on the last-drawn wage. The projection grows both entered pay components at the selected annual rate, adds the selected future service and recalculates the 50% wage test at the future exit. It then applies the same ₹20 lakh ceiling.
The projected amount is nominal. The today's-money result divides it by inflation over the projection period. Inflation does not reduce the legal payment. The real-value figure helps you compare the future lump sum with current expenses and retirement goals.
Future wage definitions, ceilings, tax limits and employer terms may change. Use the projection for planning, not as a guaranteed receivable. A long career with strong wage growth may hit the statutory ceiling well before retirement.
What This Calculator Does Not Include
- piece-rated employee wages based on the preceding three-month average;
- seasonal-establishment gratuity based on seven days' wages per season;
- service-day evidence, breaks in service or deemed continuous-service tests;
- forfeiture for specified damage, violent conduct or an offence involving moral turpitude;
- state-specific administration, establishment coverage or exempted establishment rules;
- better contractual terms, historical tax deductions, surcharge, cess or final return calculations;
- government service-rule computation, nomination disputes, delayed-payment interest or litigation.
Related Salary and Retirement Calculators
Use these tools to review gratuity with provident fund, take-home pay and retirement planning.
Frequently Asked Questions
What is the gratuity formula in India?
For a covered monthly-rated employee, the standard formula is last-drawn monthly wages multiplied by 15, divided by 26, and multiplied by eligible service years. The current statutory maximum is ₹20 lakh.
Is gratuity calculated on Basic Pay or gross salary?
Current statutory wages start with Basic Pay, Dearness Allowance and retaining allowance. If tested allowances exceed 50% of remuneration, the excess is added back. Gross salary should not be entered blindly.
Is five years of service compulsory for gratuity?
Five years is normally required for retirement, resignation or superannuation. It is not required for death or disablement. A directly employed fixed-term employee qualifies on contract expiry after one year of service.
Does six months round up to a full year?
No. The statutory wording refers to a part of a year in excess of six months. Exactly six additional months does not round up, while seven to eleven months normally counts as another year for a regular eligible employee.
What is the maximum gratuity amount in 2026?
The current maximum statutory gratuity notified by the Central Government is ₹20 lakh. Better terms under an award, agreement or employment contract may provide a higher payment.
How is fixed-term employee gratuity calculated?
A directly employed fixed-term employee becomes eligible after one year from the contract start. On contract expiry, gratuity is paid on a pro-rata basis using last-drawn wages and service.
Is gratuity tax-free?
Eligible government gratuity may be fully deductible. For non-government employees, the deduction is limited by the applicable formula, actual receipt and notified ceiling. A higher payment may have a taxable portion.
When should an employer pay gratuity?
The Code states that the employer should pay gratuity within 30 days from the date it becomes payable. Delayed-payment consequences and disputes need a case-specific review.
How accurate is this gratuity calculator?
It accurately applies its stated monthly-rated formula, eligibility settings, wage test and ceiling. Actual entitlement depends on payroll classification, continuous service, coverage, employer terms and official determination.