Gratuity Calculator India 2026: New Labour Code, CTC & Wages

It follows the new labour code, calculating on wages (not just Basic + DA) for private employees in permanent or contract (fixed-term) roles. Permanent employees need 5 years of service (not on death or disablement), and fixed-term employees qualify after 1 year. To see your wages and take-home under the 50% rule, use the new labour code salary calculator.

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How to Calculate Gratuity: The Formula

÷ 26 gives a daily wage (26 working days a month). × 15 gives 15 days' wages per year. Years are completed years, plus one if the final part-year is more than six months. Example: wages ₹30,000 for 5 years → (30,000 ÷ 26) × 15 × 5 = ₹86,538.

Gratuity Examples by Salary and Years of Service

The salary figures are monthly wages for gratuity (Basic + DA, after the 50% rule), not gross salary or CTC.

On a ₹10 LPA CTC, wages are usually at least half of pay, around ₹41,667 a month, so gratuity after 5 years is about ₹1.2 lakh. For your exact figure, use the gratuity calculator above.

How to Use This Online Gratuity Calculator

You need your dates of service and one salary figure from your offer letter or payslip. It also works as a gratuity calculator in months: it counts your exact years and months of service from your date of joining and date of exit, so you don't have to work them out yourself.

1. Choose your employee type. Select Permanent for regular employees, or Contract for fixed-term employees.
2. Choose the reason for exit. Select Death / Disablement if that applies; the minimum service condition is then not applied.
3. Enter your date of joining and date of exit. Use your actual or expected last working day.
4. Enter your salary in any one way. If you know your monthly wages, enter them. Otherwise enter your CTC (tap AN/MO to switch between annual and monthly). Otherwise enter your gross salary and Basic + DA from your payslip.
5. Read your result. It updates as you type, showing whether you're eligible, your wages for gratuity, the years counted and your gratuity amount, with the full working. Use Copy to save it.

How Gratuity Is Calculated in 2026 Under the New Labour Code

The formula hasn't changed. What changed is the salary it applies to. Since the Code on Social Security, 2020 came into force on 21 November 2025 (see the Ministry of Labour and Employment), gratuity is calculated on "wages" as defined in the labour codes. Earlier, under the Payment of Gratuity Act, 1972, it was calculated on Basic + DA alone.

"Wages" means Basic + DA + retaining allowance. Allowances such as HRA and conveyance are excluded, but only up to 50% of your total pay. If your allowances are more than half your gross salary, the extra amount is added back to your wages. This is the 50% wage rule, and it's why many people's gratuity goes up under the new code.

For 5 years of service, gratuity on Basic + DA alone would be ₹69,231. On wages under the new code it is ₹86,538, which is ₹17,307 more. That is why a salary gratuity calculator needs your gross salary and your Basic + DA, or your CTC, not Basic alone. This calculator applies the 50% wage rule automatically. Many older calculators don't, so they can understate your gratuity.

For more on what changed and what didn't, read new gratuity rules 2026.

Gratuity for Permanent vs Contract (Fixed-Term) Employees

The 5-year condition does not apply on death or disablement. Gratuity is then paid to the employee or their nominee, whatever the length of service. On the death of an employee who is a PF member, the family may also receive the EPFO insurance benefit; see the EDLI calculator.

The Labour Ministry's FAQs count the 1 year from the start of the contract, so an 11-month contract does not qualify. This calculator applies the 1-year rule to fixed-term employees whose employment ends on or after 21 November 2025. Contract labour hired through a contractor still needs 5 years. For how gratuity works in a contract role and how it shows up in your CTC, read new gratuity rules for contract employees.

How Years and Months of Service Are Counted

Gratuity is paid for every completed year of service, plus any final part-year of more than six months. The calculator does this rounding for you from your dates.

Close to 5 years? High Courts have treated 4 years plus 240 days actually worked in the fifth year (190 days where the establishment works fewer than 6 days a week) as 5 years of continuous service. It depends on your attendance and is not automatic, so the calculator applies it only if you tick Worked 240+ days in the 5th year. If you're in this range, including 4 years 7 months, read gratuity after 4 years 8 months.

Maximum Gratuity Limit and Tax on Gratuity

• Maximum gratuity: for private-sector employees, statutory gratuity is capped at ₹20 lakh. The calculator applies this ceiling.
• Tax-free gratuity: for private-sector employees, gratuity is tax-free up to ₹20 lakh under Section 19 of the Income-tax Act, 2025, earlier Section 10(10) (see the Income Tax Department). This is a lifetime limit across all your employers, and it applies in both the old and new tax regimes. Any amount above it is taxed as salary. For long service and the ceiling in detail, read retirement gratuity in India.
• Government employees: central and state government employees follow separate service rules, with a central government ceiling of ₹25 lakh from 1 January 2024 (set by the Department of Pension and Pensioners' Welfare), and their gratuity is fully tax-exempt. Their formula is different; see 7th Pay Commission gratuity calculation formula.

When Is Gratuity Paid?

Gratuity becomes payable when your employment ends: on resignation, retirement or superannuation, termination, the end of a fixed-term contract, or death or disablement. Your employer must pay it within 30 days of it becoming payable. If they pay late, they owe you simple interest for the delay.

Gratuity is part of your full and final settlement, alongside leave encashment and your last salary. It often appears in your CTC as a yearly provision of about 4.81% of wages, but it's paid only when you leave, never monthly. See what else you're owed in full and final settlement, and add it all up with the full and final settlement calculator.

If your job ends through retrenchment, you are owed retrenchment compensation under the Industrial Relations Code, 2020 in addition to gratuity. Work it out with the retrenchment compensation calculator.

Who Should Use This Calculator, and Its Assumptions

Who it's for: private employees planning a resignation or retirement, contract and fixed-term employees checking the 1-year rule, HR and payroll teams checking full and final settlements, and employers estimating gratuity liability. It works as a gratuity calculator for private employees in any organisation covered by the Code on Social Security.

Assumptions:

• Salary priority: if you enter wages, they are used as entered. If you enter CTC, wages are taken as 50% of total remuneration (CTC minus employer gratuity, and ESI and statutory bonus where wages are ₹21,000 or less), the labour code minimum, matching our salary breakup calculator. Otherwise wages come from your Basic + DA plus any allowances above 50% of gross salary. Your employer's payroll may classify some components differently.
• Permanent employees need 5 full years. The 4 years + 240 days court interpretation is applied only if you tick the 240-day box.
• On death or disablement, no minimum service is applied, and gratuity is worked out on the years counted.
• The statutory ₹20 lakh ceiling is applied. Company policies that pay more are not included.
• Government employees under central or state service rules should not use this calculator for their final amount.
• Results are estimates for planning. Confirm your final payout with your payroll team.