How to use the gratuity calculator
- Enter your last drawn basic plus DA per month.
- Enter your years and extra months of service.
- Read the gratuity amount and the tax-free part.
About this tool
Gratuity is paid by an employer on leaving after long service. The formula is last drawn basic plus DA, multiplied by 15, divided by 26, multiplied by completed years of service. More than six extra months is rounded up to a full year. Gratuity up to 20 lakh is exempt from tax.
The gratuity formula, step by step
Gratuity = last drawn wages (per month) × 15 ÷ 26 × years of service. The 15 stands for 15 days of wages and the 26 for the working days in a month. Two examples with monthly wages of ₹50,000:
- 8 years and 4 months: the 4 extra months are ignored, so 8 years count. ₹50,000 × 15 ÷ 26 × 8 = ₹2,30,769.
- 8 years and 7 months: more than 6 months rounds up to 9 years. ₹50,000 × 15 ÷ 26 × 9 = ₹2,59,615.
Who is eligible?
Permanent employees generally become eligible after five years of continuous service with the same employer, except in the case of death or disability, where no minimum applies. Under the new labour codes in force since 21 November 2025, fixed-term employees can receive gratuity on a pro-rata basis after one year of continuous service. Check your contract and with your HR team, because the exact treatment depends on your employment type.
What counts as wages now
Wages mean basic pay, dearness allowance and retaining allowance. The labour codes require wages to make up at least 50% of total remuneration, with any excess allowances added back. If your basic was a small share of CTC, your gratuity base can be higher than before. Enter your last drawn basic plus DA in the calculator, using your updated structure if your employer has revised it.
Tax treatment
Gratuity received on retirement, resignation or death is exempt from tax up to ₹20 lakh, subject to the conditions in the law. Any amount above the limit is added to your income. If your employer pays more than the formula amount, the extra is taxable in the same way. Government employees have separate rules.
Frequently asked questions
What is the gratuity formula?
Last drawn monthly salary × 15 ÷ 26 × years of service, where salary means basic plus dearness allowance.
How are extra months counted?
More than six months is rounded up to a full year. Six months or less is ignored.
Is there a limit?
Gratuity up to ₹20 lakh is tax free. Eligibility rules depend on your employment terms and the latest labour code provisions.
When is gratuity paid?
It is due when you leave after becoming eligible, and the law expects the employer to pay within a short fixed period of your exit. Ask HR for the date in your settlement.
Is gratuity part of CTC?
Often yes. Many employers include the yearly gratuity provision in CTC even though you receive it only when you leave.