Gratuity Calculator: How It Works, Who Can Get It, and Tax Rules
Gratuity is paying 15 days' worth of wages for every year worked, where one day's wage equals monthly wages ÷ 26. On last wages of ₹30,000 a month (basic + DA), 10 years of service gives ₹1,73,077.
Gratuity due
—
| Wages a month | |
|---|---|
| For each year (15 ÷ 26 × wages) | |
| Years counted | |
| Gratuity | |
| Tax-free (up to ₹20 lakh) | |
| Taxable as salary |
For employees covered by the gratuity law. Your employer may pay more under its own scheme, but not less.
Gratuity based on wages and years worked
Last month's wages (basic pay + DA) × 15 ÷ 26 × years.
| Years of service | Wages ₹30,000 a month | Wages ₹50,000 a month |
|---|---|---|
| 5 years | ₹86,538 | ₹1,44,231 |
| 7 years | ₹1,21,154 | ₹2,01,923 |
| 10 years | ₹1,73,077 | ₹2,88,462 |
| 15 years | ₹2,59,615 | ₹4,32,692 |
| 20 years | ₹3,46,154 | ₹5,76,923 |
How it's calculated
- Wages = your last monthly basic pay plus dearness allowance. If you put in total pay, wages are at least 50% of total.
- Years counted are the full years you've worked, plus one extra if the remaining months are more than six. Both your joining day and last day at work count as service time.
- Gratuity = 15 ÷ 26 × wages × years.
- To qualify, you need 5 full years of continuous service, or 1 year if on a fixed-term contract. There's no minimum if employment ends due to death or disablement.
- For private-sector workers, gratuity up to ₹20 lakh during their career is tax-free; anything above is taxed as salary.
The rules are in the Code on Social Security, 2020, one of the labour codes starting from 21 November 2025. It retains the 15/26 formula from the Payment of Gratuity Act, 1972, and adds rules for fixed-term workers and the 50% wage requirement.
When to Use the Gratuity Calculator
Our gratuity calculator helps when you're considering a job switch or retiring. Knowing how gratuity is calculated can aid in understanding what you might receive after leaving a company. This is especially useful if you're making financial plans tied to your next career move.
As you search for IT and Technology roles on Daily Hirer, keep the gratuity calculator handy. Whether you're planning to accept a new job offer or simply assessing benefits, this tool provides clarity on your potential gratuity amount. It complements your job search by giving you insights into compensation beyond just salary.