Gratuity Calculator 2026 (New Labour Code, 50% Wage Rule)

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Rules last checked on 1 October 2026. Eligibility, the 15/26 formula, the six-month rule and pro rata payment are from section 53 of the Code on Social Security, 2020, which came into force on 21 November 2025. The ₹20 lakh ceiling, the 50% wage rule and the start date for gratuity on the new wages are from the Ministry of Labour and Employment FAQs of 30 December 2025. The one-year rule for fixed-term employees is from the Ministry's additional FAQs of 16 March 2026. The ₹25 lakh ceiling for central government employees is from DoPPW OM No. 28/03/2024-P&PW(B)/Gratuity/9559 of 30 May 2024 (PIB, 1 June 2024). Tax treatment is from section 19 of the Income-tax Act, 2025, as amended by the Finance Act, 2026.

Short answer

Gratuity is 15 days' wages for every year of service, where 15 days' wages means your last monthly wages ÷ 26 × 15. A part-year counts as a full year only if it is more than six months. You need 5 years of continuous service unless the job ends through death or disablement; a fixed-term employee qualifies after one year. Since 21 November 2025, wages for gratuity are basic + DA, topped up if your other pay is more than half of your total pay. The most an employer has to pay is ₹20 lakh (₹25 lakh for central government staff). On ₹50,000 basic + DA and 10 years, gratuity is ₹2,88,462.

The gratuity formula, step by step

Section 53 of the Code on Social Security says the employer pays 15 days' wages for every completed year of service, or part of a year above six months, at the rate of wages you last drew. For anyone paid monthly, 15 days' wages is your monthly wages divided by 26 and multiplied by 15. The 26 is the number of working days the law assumes in a month, which is why the result is a little more than half a month's pay: about 57.7%.

The six-month rule decides a lot. Say you joined on 1 April 2016 on ₹40,000 basic + DA. If your last day is 30 September 2026, you have exactly 10 years and 6 months, and the six months is not more than six months, so 10 years count: ₹2,30,769. Work one more day, to 1 October, and 11 years count: ₹2,53,846. The calculator shows the date from which each extra year counts, so you can time a resignation.

Your service runs from the joining date to the last working day, both days included. Leave, sickness, lay-off and strikes that are not your fault don't break continuous service (section 54).

What changed on 21 November 2025

Before the labour codes, gratuity under the Payment of Gratuity Act, 1972 was worked out on basic pay plus dearness allowance. The codes kept that, with one addition. If everything else you are paid (HRA, special allowance, conveyance, overtime, employer PF and so on) comes to more than half of your total pay, the excess is added to your wages. Performance incentives, ESOPs, reimbursements and gratuity itself are left out of the test.

In practice, take your basic + DA and half of your total fixed pay; your gratuity wages are whichever is higher. A salary built on a 35% or 40% basic now earns gratuity on 50% of pay. The Ministry's FAQ also covers older service: if your gratuity becomes payable on or after 21 November 2025, all of your service is counted at your last drawn wages under the new rules, including the years before the codes came in.

Fixed-term employees are the other big change. Their gratuity is paid pro rata when the contract ends, and the Ministry has clarified that they qualify after one year of the contract. The Code doesn't say how to work out pro rata, so the calculator uses completed months and shows the full-year figure next to it.

Central government employees

Central government staff are outside the Code. Their retirement gratuity comes from rule 45 of the CCS (Pension) Rules, 2021, or the CCS (Payment of Gratuity under NPS) Rules, 2021 for those who joined after 2003. It is a quarter of your emoluments (basic pay + DA) for every completed six months of qualifying service, up to 16½ times the emoluments, which you reach at 33 years. You need 5 years of qualifying service, and 4 years 9 months is treated as 5.

The ceiling went up from ₹20 lakh to ₹25 lakh from 1 January 2024, when DA reached 50%. All of it is tax-free. State government, PSU and bank employees follow their own rules, so the private-sector option is usually closer for them. Death gratuity for government staff uses a separate table and isn't covered here.

Tax on gratuity

Under section 19 of the Income-tax Act, 2025, gratuity paid to government employees is fully exempt. For everyone else, the statutory amount is tax-free up to ₹20 lakh, and that ₹20 lakh is a lifetime limit across all your employers. Anything an employer pays above the formula or the limit is taxed as salary in the year you get it.

There is one open question for salaries hit by the 50% rule. The tax law still describes the exempt amount by the formula of the old 1972 Act, which used basic + DA alone. The calculator treats the whole statutory amount as tax-free and tells you how much of it comes from the 50% top-up, so you can check how your employer reports it in Form 16.

If you worked for a small employer with fewer than 10 staff, gratuity is voluntary. When it is paid, the tax-free part is the lowest of the amount paid, ₹20 lakh, and half a month's average salary (last 10 months) for each completed year. Pick that option to see the split.

Worked examples

Private employee, 12 years, 40% basic

Meera joined on 15 June 2014. Her basic + DA is ₹60,000 and her total fixed pay, including HRA, allowances and employer PF, is ₹1,40,000 a month. Half of ₹1,40,000 is ₹70,000, which is more than her basic + DA, so her gratuity wages are ₹70,000.

If her last day is 1 October 2026, her service is 12 years, 3 months and 17 days. The extra 3 months are not more than six, so 12 years count: ₹70,000 ÷ 26 × 15 × 12 = ₹4,84,615. On basic + DA alone, as under the old Act, it would have been ₹4,15,385, so the 50% rule adds ₹69,231. If she stays until 15 December 2026, 13 years count and gratuity becomes ₹5,25,000, or ₹40,385 more for about ten more weeks of work.

Central government employee retiring after 18 years 9 months

Ravi joined a central ministry on 1 January 2008 and retires on 30 September 2026 with emoluments (basic pay + DA) of ₹1,00,000. That is 18 years and 9 months, or 37 completed six-monthly periods.

Retirement gratuity is ₹1,00,000 ÷ 4 × 37 = ₹9,25,000. That is well under both 16½ times his emoluments (₹16,50,000) and the ₹25 lakh ceiling, and none of it is taxed. Each further six months adds ₹25,000: staying to 31 December 2026 would make it ₹9,50,000.

Questions people ask

How much gratuity will I get for 10 years on ₹50,000 basic?

₹50,000 ÷ 26 × 15 × 10 = ₹2,88,462, if ₹50,000 is your basic + DA and the 50% rule doesn't raise it. If you have 10 years and more than six months, 11 years count and it becomes ₹3,17,308.

Do I get gratuity if I resign after 4 years and 8 months?

Not under the plain wording of the Code, which needs five years of continuous service when you resign. Section 54 lets a year count as continuous if you actually worked 240 days in it (190 in some establishments), which helps when there were breaks, not when the total is short. If you are that close, the calculator shows the exact last day that gets you to five years. The five-year rule doesn't apply on death or disablement, and a fixed-term employee needs one year.

Is gratuity calculated on basic pay or on CTC?

On wages: basic pay, DA and retaining allowance. Since 21 November 2025, if your other pay is more than half of your total remuneration, the excess is added to wages. It is never calculated on full CTC.

Will the new wage rules apply to my years before November 2025?

Yes. The Ministry of Labour's FAQ says gratuity that becomes payable on or after 21 November 2025 is paid at the wages last drawn under the Code, for the whole period of service.

Is gratuity taxable?

Government employees pay no tax on it. For others, the statutory amount is tax-free up to ₹20 lakh across your working life, and anything above that, or above the formula, is taxed as salary.

How soon must the employer pay?

Within 30 days of the gratuity becoming due. If they pay late, the Code makes them pay simple interest from the due date, unless the delay was your fault and the authority allowed it.

Written by Bulan Sarkar, who checked the results by hand and against a second public calculator. Use it for planning; it isn't tax or investment advice.

Sources

CTC to In-Hand Salary Calculator

Turn your CTC into monthly take-home pay under the new labour codes, with the 50% wage rule, the ₹25,000 PF ceiling and tax in both regimes.