Quick answer
How much gratuity will I get?
Gratuity = 15 × your last monthly basic pay plus DA × years of service ÷ 26. With ₹50,000 wages and 10 years 7 months of service, 11 years are counted, so the gratuity is about ₹3,17,308. It is tax-free up to ₹20 lakh, and fixed-term employees now qualify after just 1 year.
- Formula: 15 × wages × years ÷ 26
- Eligibility: 5 years (1 year for fixed-term employees)
- Limit: ₹20 lakh, also the tax-free limit
What changed for gratuity under the new Labour Codes?
- Fixed-term employees are eligible after 1 year of service, paid pro rata
- Wages must be at least 50% of total pay; if allowances exceed 50%, the excess counts as wages, which can raise gratuity
- The ₹20 lakh ceiling continues for private-sector employees
- The rules apply from 21 November 2025, when the Code on Social Security came into force
How is gratuity calculated? A worked example
Say your last basic pay plus DA is ₹50,000 and you served 10 years and 7 months. The final 7 months are more than 6, so 11 years count. Your gratuity is 15 × ₹50,000 × 11 ÷ 26, about ₹3,17,308.
- Employer not covered by the law: the gratuity calculator uses 15 ÷ 30 and completed years only, so the same case gives ₹2,50,000
- Fixed-term staff: 2 years on ₹40,000 gives about ₹46,154; a regular employee with 2 years isn’t yet eligible
- High earners: ₹2 lakh wages for 30 years works out to about ₹34.6 lakh, but the payout is capped at ₹20 lakh
How does gratuity tax exemption work?
For non-government employees, gratuity is tax-free up to ₹20 lakh. That limit is for your whole working life, across every employer, not per job. If you’ve already received tax-free gratuity before, it reduces what is exempt next time.
An employer can choose to pay more than the statutory cap under its own policy. Anything above the ₹20 lakh exemption is generally taxed as salary at your slab rate. Government employees’ gratuity is fully exempt, and central government staff have a ₹25 lakh limit under their own rules.
Frequently asked questions
How is gratuity calculated?
For employers covered by the law, gratuity = 15 × last drawn monthly wages (basic + DA) × years of service ÷ 26. A final part-year of more than 6 months counts as a full year.
How much gratuity for 10 years with ₹50,000 salary?
For 10 years, 15 × ₹50,000 × 10 ÷ 26 = about ₹2,88,462. With 10 years and 7 months, 11 years are counted, giving about ₹3,17,308.
When am I eligible for gratuity?
Regular employees need 5 years of continuous service. Under the Code on Social Security, in force from 21 November 2025, fixed-term employees qualify after 1 year. Gratuity is also paid on death or disablement regardless of service.
Is gratuity taxable?
For non-government employees, gratuity is tax-free up to ₹20 lakh in a lifetime. Government employees’ gratuity is fully exempt.
What is the maximum gratuity limit?
The statutory ceiling is ₹20 lakh for private-sector employees. Central government employees have a ₹25 lakh limit under their own rules.
Is gratuity paid if I resign?
Yes, once you are eligible: after 5 years of continuous service, or 1 year for fixed-term employees. The same 15/26 formula applies whether you resign, retire or are laid off.
Which wages are used to calculate gratuity?
Your last drawn basic pay plus DA. Under the Labour Codes, if allowances are more than 50% of your total pay, the excess is added to wages, which can raise your gratuity.