Gratuity calculator
Gratuity due when someone leaves, under the labour codes in force since 21 November 2025, with wages worked out the new way.
Gratuity
Gratuity payable
₹2,42,308
Eligible: at least 5 years of service
| Years counted | 7 |
|---|---|
| 15 ÷ 26 × wages × years | ₹2,42,308 |
| Ceiling | ₹20,00,000 |
| Payable | ₹2,42,308 |
The ceiling applies. Gratuity is capped at ₹20 lakh until a new figure is notified under the Code.
A part year of more than 6 months counts as a full year. For non-government employees, gratuity is tax-free up to ₹20 lakh.
How it works
- Gratuity is 15 days' wages for every completed year of service. A part year of more than 6 months counts as a full year. One day's wage is monthly wages divided by 26.
- Wages are worked out under the Code on Wages. If allowances like HRA are more than 50% of total pay, the excess is added back, so a small basic pay no longer keeps gratuity low.
- Permanent employees qualify after 5 years of continuous service. Fixed-term employees qualify after 1 year.
- The working cap is ₹20 lakh until a new figure is notified under the code.
The rest of an exit, from the two-day pay rule to the documents, is in our guide, Full and Final Settlement Checklist for Indian Startups.
Where each number comes from
| Number | Used here | Official source |
|---|---|---|
| The formula | 15 days' wages for each completed year, a day's wage being monthly wages ÷ 26; a part year of more than 6 months counts as a year | Code on Social Security, 2020Section 53(1) and (2), and Explanation 3Checked 21 October 2026 |
| Who qualifies | Permanent employees after 5 years of continuous service; fixed-term employees after 1 year | PIB (on ESIC’s site): the four labour codes come into force, 21 November 2025"Gratuity eligibility after just one year"; the Code (section 53) pays fixed-term staff in proportionChecked 21 October 2026 |
| The ceiling | ₹20 lakh | Ministry of Labour and Employment: FAQs on the labour codes"currently ₹ 20 lakhs"Checked 21 October 2026 |
| Tax-free, non-government employees | Up to ₹20 lakh | Income-tax Act, 2025Section 19(1), the table, items 5 and 6Checked 21 October 2026 |
| The 50% wage rule | Allowances above half of total pay count as wages | Code on Wages, 2019Section 2(y), provisoChecked 21 October 2026 |
General information, not advice. Check with your CA.