Gratuity calculator: amount and tax-free part

How the Gratuity Calculator works

1. Enter your last drawn monthly wages (basic plus dearness allowance) and your service as completed years plus extra months.
2. The calculator checks the minimum service: 5 years for permanent employees, or 1 year for fixed-term employees under the labour codes.
3. For a covered employer, it multiplies wages by 15 ÷ 26 and by the years of service, counting more than 6 extra months in the last year as a full year, and caps the result at the legal maximum of ₹20,00,000.
4. For an employer not covered, it uses 15 ÷ 30 of the average wages and the completed years only.
5. Finally it applies the tax-free ceiling of ₹20,00,000 (less anything you claimed earlier) and shows what is tax-free and what is taxable.

Covered: Gratuity = last drawn wages × 15 ÷ 26 × years of service, at most ₹20,00,000
Years of service: more than 6 extra months in the last year counts as one full year
Not covered: Gratuity = average wages of last 10 months × 15 ÷ 30 × completed years
Wages = basic pay + dearness allowance + retaining allowance (plus any allowances above 50% of total pay)
26 = working days in a month; 15 = days of wages for each year of service

Assumptions and limits

• Checked on 21 October 2026 against the Code on Social Security, 2020 (in force from 21 November 2025), the Social Security (Central) Rules, 2026, the Labour Ministry's FAQs of December 2025 and March 2026, and section 19 of the Income-tax Act, 2025. The FAQs are guidance, not law.
• Fixed-term employees qualify after one year of service under the contract (rule 33 of the Central Rules, 2026). Service beyond a completed year counts as another full year if it is more than six months, as for permanent employees.
• The most gratuity payable by law is ₹20,00,000, the limit notified under the Code; the result is capped there. An employer can pay more under a contract or award, and that extra is taxed as salary. The ₹25 lakh figure sometimes quoted is the limit for central government employees.
• The ₹20,00,000 tax-free limit is notified separately from the legal maximum, though both are the same figure today.
• The Labour Ministry's FAQs say the Code applies to anyone whose employment ends on or after 21 November 2025, using their last drawn wages. For fixed-term contracts that began earlier, check with your employer.
• Under the Code, a year counts as continuous service if you worked at least 240 days in the preceding 12 months (190 in some cases), so 4 years plus 240 days of work can qualify as 5 years. This calculator requires a full 5 years, so it may show 'not eligible' where you would still qualify.
• Wages means basic pay plus dearness allowance and retaining allowance. If your other pay (HRA, conveyance, bonus, overtime, commission) is more than half your total pay, the excess is added to wages. Enter the wages figure your employer uses.