Free tool · Labour Codes 2025
Gratuity calculator
Work out gratuity under the new Labour Codes: the 15/26 formula, 5 years (or 1 year on a fixed-term contract), the 50% wage rule and the ₹20 lakh limit.
Gratuity payable
₹1,61,538
Service: 7 years 4 months, counted as 7 years.
₹40,000 × 15 × 7 ÷ 26
Tax: gratuity up to ₹20 lakh in a lifetime is tax-free for private-sector employees.
When it is paid: within 30 days of leaving. Late payment carries interest.
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Common questions
How is gratuity calculated?
Last monthly wages (basic + DA) × 15 × years of service ÷ 26. A part year of more than six months counts as a full year. For example, ₹40,000 × 15 × 7 ÷ 26 = ₹1,61,538.
Who is eligible for gratuity?
Employees with at least 5 years of continuous service, at companies with 10 or more employees. Since the Labour Codes came into force on 21 November 2025, fixed-term employees qualify after 1 year. There is no minimum when someone leaves because of death or disablement.
What changed with the new Labour Codes?
The Code on Social Security replaced the Payment of Gratuity Act. Fixed-term staff now get gratuity after 1 year, and "wages" follow a uniform definition: if allowances such as HRA are more than half of total pay, the extra counts as wages, which raises gratuity for many people.
Is 4 years and 240 days enough?
The law says 5 years. Some High Courts (Madras, Kerala, Delhi) have held that 4 years and 240 days of work counts as 5 years, but the Supreme Court has not settled it. The calculator flags these cases.
What is the maximum gratuity?
₹20 lakh for private-sector employees. The ₹25 lakh limit applies only to Central Government employees.
Is gratuity taxable?
Gratuity up to ₹20 lakh in a lifetime is tax-free for private-sector employees. Anything above that is taxed as salary.
When must the employer pay it?
Within 30 days of it becoming due, usually the last working day. Late payment carries simple interest.
Based on the Code on Social Security 2020 (in force from 21 November 2025) and Labour Ministry guidance, checked October 2026. An estimate: confirm with your employer or a lawyer for disputes.
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