Free tool
Gratuity Calculator (2026)
Updated for the Code on Social Security, in force from 21 November 2025. Estimates only. Rules checked 25 Oct 2026.
To apply the 50% wage rule: if basic + DA is below half of total pay, half of total pay is used as wages.
Gratuity payable
₹2,30,769
₹50,000 x 15/26 x 8 years = ₹2,30,769
- Years counted
- 8 years
- Formula
- 15/26 of monthly wages per year
- Wages used
- ₹50,000
- Tax-free part
- ₹2,30,769
- Taxable part
- ₹0
Calculating for your team? Work out gratuity for up to 10 employees in one table - free.
How gratuity is calculated
- Formula: 15/26 x last drawn monthly wages (basic + DA) x years of service, for an employer covered by the law (10 or more employees).
- Rounding: a final part-year of more than six months counts as a full year. Exactly six months does not.
- Eligibility: 5 years of continuous service for regular employees, 1 year for fixed-term employees under the Code on Social Security (in force from 21 November 2025), and no minimum on death or disablement.
- The 50% wage rule: wages must be at least half of total pay. If basic + DA is below that, half of total pay is used as wages.
- The cap: gratuity is limited to ₹20 lakh, which is also the tax-free limit for private-sector employees across a working life.
- Not covered: an employer with fewer than 10 employees is outside the law. The usual formula then is 15/30 x the average salary of the last 10 months x completed years, and payment depends on company policy.
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