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Gratuity payable at each level of last-drawn monthly wages and years of service, using wages × 15 × years ÷ 26 for employers covered by the Code (10+ employees), in force since 21 November 2025. "Wages" = basic pay + DA + retaining allowance, plus any allowances above 50% of total pay.
For example, an employee with ₹50,000 of monthly wages and 15 years of service receives ₹4.33 L in gratuity.
| Monthly wages | 5 years | 10 years | 15 years | 20 years | 25 years | 30 years |
|---|---|---|---|---|---|---|
| ₹20,000 | ₹57,692 | ₹1.15 L | ₹1.73 L | ₹2.31 L | ₹2.88 L | ₹3.46 L |
| ₹30,000 | ₹86,538 | ₹1.73 L | ₹2.60 L | ₹3.46 L | ₹4.33 L | ₹5.19 L |
| ₹50,000 | ₹1.44 L | ₹2.88 L | ₹4.33 L | ₹5.77 L | ₹7.21 L | ₹8.65 L |
| ₹75,000 | ₹2.16 L | ₹4.33 L | ₹6.49 L | ₹8.65 L | ₹10.82 L | ₹12.98 L |
| ₹1,00,000 | ₹2.88 L | ₹5.77 L | ₹8.65 L | ₹11.54 L | ₹14.42 L | ₹17.31 L |
| ₹1,50,000 | ₹4.33 L | ₹8.65 L | ₹12.98 L | ₹17.31 L | ₹20.00 L* | ₹20.00 L* |
| ₹2,00,000 | ₹5.77 L | ₹11.54 L | ₹17.31 L | ₹20.00 L* | ₹20.00 L* | ₹20.00 L* |
Figures rounded to the nearest rupee. * The formula exceeds the ₹20 lakh statutory ceiling, so the statutory amount is capped; anything an employer pays above it is taxable at slab rates. Permanent employees need 5 years of continuous service and fixed-term employees 1 (paid pro rata); no minimum applies on death or disablement. Employers NOT covered by the Code have no statutory gratuity; the tax-free benchmark there is basic pay + DA × 15 × completed years ÷ 30 — about 13% lower. Government employees are paid under their own pension rules, with the gratuity fully deductible.
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Gratuity = last-drawn wages × 15 × years ÷ 26, on the Labour Codes' wider definition of wages — in force since 21 November 2025. Fixed-term employees qualify after 1 year.
Updated 26 September 2026 — the Labour Codes changed gratuity from 21 November 2025
The Code on Social Security, 2020 replaced the Payment of Gratuity Act, 1972. Gratuity is now worked on "wages" = basic pay + DA + retaining allowance, plus any allowances above 50% of your total pay. Exits on or after 21 November 2025 are paid on last-drawn wages under the Code (Labour Ministry FAQs, 16 March 2026).
HRA, special, conveyance, overtime, commission, employer PF. Leave out annual performance incentives.
More than 6 → counts as a full year (permanent)
Covered: Code wages ÷ 26. Not covered: no statutory gratuity — shows the tax-free benchmark, basic pay + DA ÷ 30 × completed years.
Gratuity payable under the Code
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If the gratuity arrives at retirement, it counts toward your retirement corpus alongside EPF and NPS. Add it to "Current Savings" in the retirement calculator for India to see how much corpus is still left to build.
Total monthly remuneration
Allowances added back (above 50%)
Wages for gratuity
Formula and tax at a glance
Covered: wages × 15 × years ÷ 26, capped at ₹20 lakh (Code on Social Security, 2020, section 53). Chapter V covers factories, mines, oilfields, plantations, ports, railway companies and shops or establishments with 10+ employees. Tax: from tax year 2026-27, gratuity is deducted from salary income under section 19 of the Income-tax Act, 2025 up to the exempt limit; any excess is taxed at slab rates. Confirm your figures with your employer.
Gratuity is one of several end-of-employment payouts (also EPF, leave encashment, NPS lumpsum). Richify AI tracks them as one retirement corpus and models the tax implications.
Download Richify — 7-day free trialThe four Labour Codes came into force on 21 November 2025, and the Code on Social Security, 2020 replaced the Payment of Gratuity Act, 1972. Three things changed for the calculation. (1) Gratuity is now computed on the Code's definition of "wages" — basic pay, dearness allowance and retaining allowance, plus any excess of other allowances over 50% of your total remuneration. (2) Fixed-term employees qualify after 1 year of service instead of 5. (3) Per the Labour Ministry's FAQs of 16 March 2026, anyone who exits on or after 21 November 2025 is paid on the last-drawn wages under the Code.
The 15/26 formula itself is unchanged.
Gratuity = last-drawn monthly wages × 15 × years of service ÷ 26 (Code on Social Security, 2020, section 53 and its Explanation 3 — 26 is the working days in a month, so 15 days' wages per year). Example: wages of ₹60,000 and 15 years: 60,000 × 15 × 15 ÷ 26 = ₹5,19,231.
The statutory amount is capped at ₹20 lakh.
On "wages" as the Code defines them: basic pay + dearness allowance + retaining allowance. Allowances such as HRA, conveyance, overtime and commission are excluded — but if those excluded payments add up to more than 50% of your total remuneration, the excess is added back into wages.
Example: basic pay + DA of ₹30,000 and other allowances of ₹50,000 is ₹80,000 total; half is ₹40,000, so ₹10,000 is added back and gratuity is worked on ₹40,000. Over 10 years that is ₹2,30,769 instead of ₹1,73,077 on basic pay + DA alone.
Annual performance incentives are not wages (Labour Ministry FAQ, 16 March 2026).
Under Chapter V of the Code on Social Security, 2020: employees of every factory, mine, oilfield, plantation, port and railway company, and of shops or establishments with 10 or more employees. Permanent employees need 5 years of continuous service (working journalists 3); fixed-term employees need 1 year.
The minimum does not apply where employment ends through death or disablement. Contract labour engaged through a contractor still needs 5 years, and the contractor pays (Labour Ministry FAQ, 16 March 2026).
Yes in three cases: you are a fixed-term employee with at least 1 year of service; employment ends through death (paid to your nominee or heirs) or disablement; or you are a working journalist with 3 years. Otherwise a permanent employee needs 5 years of continuous service.
Section 54 of the Code deems a year continuous if you actually worked at least 240 days in the preceding 12 months (190 days below ground in a mine or where the establishment works under six days a week). If you are refused, you can apply to the competent authority under section 56.
A fixed-term employee who completes 1 year is paid gratuity pro rata — the same 15/26 formula applied to the actual service. Example: wages of ₹40,000 and a 18-month contract: 40,000 × 15 × 1.5 ÷ 26 = ₹34,615.
The Code says "pro rata" without prescribing the method; this calculator uses exact months — confirm with your employer.
For permanent employees, each completed year counts, and a final part-year counts as a full year only if it is more than 6 months (section 53(2)). So 10 years 7 months = 11 years; 10 years 6 months = 10 years.
At ₹60,000 wages the extra year is worth ₹34,615. Fixed-term and deceased employees are paid pro rata on actual service.
The statutory gratuity ceiling is ₹20 lakh — notified on 29 March 2018 and continued under the Code by its savings clause (section 164). For tax years from 2026-27 the Income-tax Act, 2025 applies: section 19(1) (Table, Sl.
No. 5-6) deducts gratuity from salary income — statutory gratuity up to the amount due under the gratuity law, and any other gratuity up to the least of the amount received, the limit the Central Government notifies, and half a month's average basic pay + DA per completed year. Government employees' death-cum-retirement gratuity is fully deductible.
Anything paid above the exempt amount is taxed at slab rates — confirm your case with your employer.
On superannuation, retirement, resignation, death or disablement, or when a fixed-term contract ends. The employer must pay within 30 days of it becoming payable (section 56(3)); after that, simple interest is due at a rate not exceeding the Central Government's rate for repayment of long-term deposits.
Disputes go to the competent authority under section 56.
At monthly wages of ₹30,000: ₹1,73,077; ₹50,000: ₹2,88,462; ₹75,000: ₹4,32,692; ₹1,00,000: ₹5,76,923; ₹1,50,000: ₹8,65,385. Formula: wages × 15 × 10 ÷ 26. "Wages" means basic pay + DA + retaining allowance plus any allowances above 50% of pay — use the calculator above for your own split.
Historical note: under the Payment of Gratuity Act, 1972 (repealed by the Code), gratuity was 15/26 × last-drawn basic pay + DA × years, with no add-back of allowances, and fixed-term employees had no shorter qualifying period. Per the Labour Ministry's FAQs of 16 March 2026, exits on or after 21 November 2025 are paid on last-drawn wages under the Code.