Gratuity Calculator 2026: Old Rules vs New Labour Code
Work out exactly how much gratuity you’ll get when you resign, retire or finish a contract. This gratuity calculator follows the new rules in force since 21 November 2025, including the 1-year rule for fixed-term staff and the 50% wage rule, and shows the old figure side by side.
Total monthly pay before deductions (basic + DA + HRA + allowances). Used for the new 50% wage rule.
Gratuity formula under the new labour code
The 15 ÷ 26 part means you get 15 days’ wages for every year worked, taking a month as 26 working days. So on wages of ₹40,000 a month, each year of service is worth about ₹23,077.
Example
Ria’s monthly gross pay is ₹1,00,000, of which basic + DA is ₹40,000. She has worked 7 years and 7 months.
- Old rules: ₹40,000 × 15/26 × 8 years = ₹1,84,615
- New rules: her basic + DA is only 40% of pay, so her wages for gratuity are raised to 50%, which is ₹50,000. ₹50,000 × 15/26 × 8 = ₹2,30,769
That’s about ₹46,000 more, purely from the 50% wage rule.
What changed with the new labour codes
| Rule | Before 21 Nov 2025 | Now (Code on Social Security, 2020) |
|---|---|---|
| Law | Payment of Gratuity Act, 1972 | Code on Social Security, 2020 |
| Permanent employees | 5 years of continuous service | 5 years (unchanged) |
| Fixed-term employees | Same 5-year rule, so most got nothing | Eligible after 1 year, paid in proportion to service |
| Wages used | Basic + DA only | Basic + DA, but allowances above 50% of pay are added back |
| Maximum gratuity | ₹20 lakh | ₹20 lakh |
| Payment deadline | 30 days | 30 days, with interest if late |
Who is eligible for gratuity?
- Permanent employees after 5 years of continuous service with the same employer. Courts and labour rules generally treat 4 years plus 240 working days as meeting this.
- Fixed-term (contract) employees after 1 year of service, on a pro-rata basis.
- Death or disablement: paid regardless of length of service, to the employee or their nominee.
- Covered employers: establishments with 10 or more employees. If yours is smaller, gratuity is voluntary, and the calculator uses the common 15 ÷ 30 method for full years only.
Is gratuity taxable?
- Central and state government employees: fully tax-free.
- Private-sector employees: tax-free up to ₹20 lakh over your whole career. Anything an employer pays above that, for example as a goodwill top-up, is added to your salary income and taxed at your slab rate.
- Under the new regime and the old regime, the exemption works the same way.
How to claim your gratuity
- Check your nominee on record with HR, and update it if needed.
- When you resign or retire, HR usually triggers gratuity in your full and final settlement. Ask for the gratuity figure in writing.
- The employer must pay within 30 days of it becoming payable. If they delay, interest is payable on the amount.
- If your employer refuses or underpays, you can raise a claim with the labour authority for your area.
Gratuity calculator FAQs
How is gratuity calculated in 2026?
Gratuity = last drawn wages × 15 ÷ 26 × completed years of service, with any part-year above six months rounded up. Under the new labour code, wages are basic + DA, but not less than 50% of your total pay. The maximum is ₹20 lakh.
Can I get gratuity after 1 year?
Yes, if you are a fixed-term employee. Since 21 November 2025, fixed-term staff become eligible after one year and get gratuity in proportion to their service. Permanent employees still need five years, except in case of death or disablement.
Do I get gratuity if I resign after 4 years and 8 months?
In most cases, yes. Service of 4 years plus 240 working days in the fifth year is generally treated as five years of continuous service. Gratuity would then be calculated on 5 years, since the part above six months rounds up.
What is the maximum gratuity amount?
₹20 lakh. Anything paid above that is at the employer’s discretion and is taxable for private-sector employees.
Is gratuity included in my CTC?
Many employers show it in CTC as an estimate (about 4.81% of basic). It is still paid only when you leave after becoming eligible, and it should not be deducted from your monthly salary.
Does the new 50% wage rule increase my gratuity?
Yes, if your basic + DA is less than half of your total pay. Allowances above 50% are added back to wages, so the gratuity base goes up. If your basic is already 50% or more of your pay, nothing changes.
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Sources and how we checked
Last checked: 22 October 2026. The calculator follows the gratuity provisions (Chapter V) of the Code on Social Security, 2020, in force with the four labour codes from 21 November 2025: 15 days’ wages for each year of service, the 50% wage rule, and one year of service for fixed-term employees. The tax-free limit is ₹20 lakh for non-government employees under Section 10(10) of the Income-tax Act.
- Primary law: The Code on Social Security, 2020 (Act 36 of 2020), India Code
- New labour code gratuity rules, 50% wage rule and ₹20 lakh cap: Outlook Money (April 2026); Angel One (Nov 2025)
- Code on Social Security, 2020: Ministry of Labour and Employment
This calculator gives an estimate for planning. Your employer’s figure may differ slightly depending on how wages and service are recorded. Not legal or tax advice.
We write practical guides on money, tax, salary, wellness and India news. Rates, rules and dates come from official sources such as RBI, SEBI, the Income Tax Department, India Code and government notifications, linked in each article with the date we last checked them. We don’t accept payment to change what we write.
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