Gratuity Calculator — Payout under the Code on Social Security, 2020

How to use the gratuity calculator

1. Enter your Last drawn monthly wages (basic + DA), plus any retaining allowance.
2. If you are covered by the Code, you can also enter your Other monthly pay outside basic + DA, such as HRA, conveyance and special allowances. The calculator uses it only for the 50% rule explained below. Leave it at 0 to skip.
3. Enter your Completed years of service and any Additional months.
4. Under Employment, choose Covered by the Code on Social Security (15/26 formula) or Not covered (half-month salary per completed year).
5. Under Leaving because of, choose resignation, retirement or termination; death of the employee; disablement due to accident or disease; or the end of a fixed-term contract.
6. Read the gratuity, the amount by formula before the ceiling, the years counted, and the tax-exempt and taxable parts. A warning appears if you do not meet the service condition.

What it does and when to use it

Gratuity is a lump sum an employer pays when you leave after long service, retire, or when employment ends because of death or disablement. Since 21 November 2025 the rules for most employees are in the Code on Social Security, 2020, which replaced the Payment of Gratuity Act, 1972.

Use the calculator to:

• Estimate your payout before you resign or retire.
• Check the five-year rule, so you do not leave a few months short.
• See the effect of the ceiling if you have long service and a high salary.
• See whether the 50% rule raises your wages if most of your pay is allowances.
• Understand the gratuity line in your CTC, which is not the same thing as what you will be paid.

For the rest of your pay, the CTC to In-hand Salary Calculator includes a gratuity provision in its breakdown. If you will invest the payout, the FD Calculator and the PPF Calculator show how it could grow.

The rules in the Code on Social Security

How it works

Covered employees (the default)

• Wages = basic + DA. If your other pay is more than half of your total pay, the part above half is added to wages. For example, ₹20,000 basic + DA and ₹40,000 of allowances make ₹60,000 in total; half is ₹30,000, so ₹10,000 is added and wages become ₹30,000.
• Years counted = completed years, plus one if the extra months are more than six
• For death, or the end of a fixed-term contract, the calculator uses your exact service in years and months instead (pro rata)
• Gratuity by formula = monthly wages × 15 × years counted ÷ 26
• Gratuity = the formula amount, capped at ₹20,00,000
• Gratuity is shown as nil with a warning if you resign with less than five years of service, or a fixed-term contract ends before one year

Employees not covered

• What you are paid depends on your employer’s scheme. The calculator shows half a month’s salary × completed years (part years are ignored), the formula the Income-tax Act uses for the exempt part
• No statutory ceiling is applied to the amount, but the tax-exempt part is capped at ₹20 lakh

Tax-exempt part = the smaller of the gratuity and ₹20,00,000; the rest is shown as taxable. Everything runs in your browser.

Worked examples

All figures are from the calculator, for covered employees unless stated.

1. Ten years on ₹50,000. ₹50,000 × 15 × 10 ÷ 26 = ₹2,88,461.54, so Gratuity: ₹2,88,461.54, all within the exempt limit.

2. Twenty years and seven months on ₹50,000. Seven months is more than six, so Years counted: 21. Gratuity is ₹6,05,769.23. With six months or less, it would count only 20 years.

3. Twenty-five years on ₹2,00,000. The By formula (before ceiling): ₹28,84,615.38, but statutory gratuity is capped, so the gratuity shown is ₹20,00,000.00. The calculator notes that an employer may pay more voluntarily and that any amount above ₹20 lakh is taxable.

4. A fixed-term contract of two years and six months on ₹40,000. The five-year rule does not apply when a fixed-term contract ends, and gratuity is pro rata: ₹40,000 × 15 × 2.5 ÷ 26, so Gratuity: ₹57,692.31.

5. Resigning after four years and five months on ₹40,000. The formula would give ₹92,307.69, but you have not completed five years, so the calculator shows: Gratuity on resignation needs at least 5 years of continuous service and a gratuity of nil.

6. An employee not covered by the Code, twelve years on ₹60,000. Half a month’s salary for each completed year: ₹30,000 × 12, so Gratuity: ₹3,60,000.00, all within the ₹20 lakh exempt limit.

7. An employee who dies after three years and four months on ₹40,000. No five-year condition, and gratuity is pro rata on 3.33 years: ₹40,000 × 15 × 3.33 ÷ 26, so Gratuity: ₹76,923.08, paid to the nominee or heirs.

8. Ten years on ₹20,000 basic + DA with ₹40,000 of allowances. The allowances are more than half of the ₹60,000 total, so ₹10,000 is added: Wages used (after the 50% rule): ₹30,000.00, and gratuity is ₹1,73,076.92 instead of ₹1,15,384.62.

9. A fixed-term contract that ends after ten months on ₹30,000. Under one year, so the calculator shows: A fixed-term employee is eligible for gratuity after one year of service under the contract and a gratuity of nil.

Tax on gratuity (tax year 2026-27)

The Income-tax Act 2025 deals with gratuity in the table in section 19:

• Statutory gratuity (Sl. 5): exempt up to the amount worked out under section 4(2) and (3) of the Payment of Gratuity Act, 1972. That Act has been replaced by the Code, which uses the same 15-days-per-year formula with a notified ceiling of ₹20 lakh. The entry has not yet been updated to name the Code, and the old Act had no pro rata rule for deaths or fixed-term contracts, so in those cases ask a tax adviser how the exempt amount is worked out.
• Other gratuity (Sl. 6): exempt up to the least of the gratuity received, half a month’s salary (averaged over the ten months before the event) for each completed year, and an amount notified by the Central Government. Salary here means basic pay and DA only. Under section 19(2)(a) the limit applies to all such gratuity you receive over your career, less what was exempt before.
• The notified amounts: the Income Tax Department’s FAQs say the limit is ₹20,00,000 for covered employees (notification S.O. 1420(E) of 29 March 2018) and for employees not covered (S.O. 1213(E) of 8 March 2019). Section 536(2)(j) of the 2025 Act keeps notifications made under the old Act in force where they are consistent with the new one.

Some government and defence gratuity is fully exempt under separate entries, which the calculator does not handle.

Limits and tips

• What counts as total pay. The 50% rule compares excluded payments with all your pay. The Ministry’s FAQs say performance incentives, ESOPs, variable pay and reimbursements are not part of wages; whether your employer counts them in the total can vary. Use fixed monthly allowances for the estimate.
• Disablement and reduced wages. If you kept working on reduced wages after a disablement, the Code uses your earlier wages for the earlier period (s.53(4)). The calculator uses one wage for all years.
• Not covered: average salary. For the tax exemption, the Act uses your average salary over the last ten months. If your pay changed in that time, enter that average instead of your last salary.
• Seasonal work at seven days’ wages per season, and the three-year rule for working journalists, are not modelled.
• Forfeiture. Gratuity can be reduced or withheld if you are dismissed for certain misconduct (s.53(6)). The calculator assumes none.
• Your employer’s figure is final. Your service record, wage definition and any better terms in your contract decide what you are paid. This is an estimate, not legal or tax advice.