Gratuity Calculator: Formula, Rules, and Tax
Gratuity equals 15 days' pay for each service year; one day's pay is a month's 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 by Pay and Service Years
Last month's pay (basic + 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 basic monthly pay plus DA. If using total pay, wages are at least 50% of it.
- Counted years = full years of service, plus one more if the leftover part year is over six months. Service includes both joining and last working days.
- Gratuity = 15 ÷ 26 × wages × counted years.
- Eligible after 5 continuous service years, or 1 year on a fixed-term contract. No minimum if employment ends due to death or disablement.
- Up to ₹20 lakh of gratuity is tax-free for private-sector employees; any extra is taxed as salary.
Rules: the Code on Social Security, 2020, effective from 21 November 2025. It retains the Payment of Gratuity Act, 1972's 15/26 formula, and adds the one-year rule for fixed-term workers and the 50% wage rule.
When to Use the Gratuity Calculator
Use the gratuity calculator before you resign from your current IT job. It helps you see how much you might receive as a gratuity payment. This can be valuable in making your decision about leaving a position.
Checking the gratuity amount is also wise when you receive a job offer. It gives you a clearer picture of your total benefits when comparing new and current job offers. Use it alongside our job search and application features on InnHirers to fully prepare for your next career step.