Am I eligible for gratuity after 4 years and 8 months?

For permanent employees, continuous service of 4 years 240 days (or 190 days in some establishments) has been treated by courts as completing five years. Fixed-term employees under the Labour Codes are eligible after one year.

Did the Labour Codes increase gratuity?

For many employees, yes. 'Wages' must be at least 50% of total remuneration, so where basic salary was set low, the excess allowance is added back for gratuity, which raises the amount.

Is gratuity part of CTC?

Many employers include the gratuity provision (about 4.81% of basic) in CTC, but it is paid only when you leave after becoming eligible.

Can I rely on this calculator's result for filing?

Use it as a planning estimate. The final figure depends on the tax year's rules and your exact documents, so a CA should review it before you file or pay.

Does the calculator store my data?

No. The calculation runs in your browser and nothing you type is saved. If you want a CA to review it, share your documents through our checklist-led process.

Salary & HR calculator

Gratuity Calculator

Gratuity under the Code on Social Security, 2020 (which replaced the Payment of Gratuity Act from 21 November 2025) is 15 days' wages for every completed year of service, calculated as last drawn wages × 15 × years ÷ 26. Employees qualify after five years of continuous service and fixed-term employees after one year; the service condition doesn't apply on death or disablement. Up to ₹20 lakh is tax-free for private-sector employees.

Formula: 15 × wages × years ÷ 26
Tax-free limit (private): ₹20 lakh
Fixed-term employees: Eligible after 1 year

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Gratuity Calculator

Estimate gratuity payout under the Payment of Gratuity Act, 1972.

Gratuity

Last drawn basic salary + DA (₹ / month)

Years of service

Minimum 5 years required to be eligible.

Employer coverage under Gratuity Act

Covered (10+ employees — formula: 15/26)

Not covered (formula: 15/30)

Formula

Gratuity = (Last salary × 15 × 10 years) ÷ 26

Gratuity payable

₹4,61,538

Tax-free amount (up to ₹20L)

₹4,61,538

Taxable gratuity

₹0

Taxable at slab rate if above ₹20L.

Gratuity is payable on retirement, death, disablement, or resignation after 5 years of service. Fraction of year greater than 6 months is counted as a full year. Tax exemption limit is ₹20 lakh under Section 10(10).

Formula and rounding

Item	Rule
Wages	Last drawn basic + DA (under the Labour Codes, at least 50% of total remuneration)
Formula (covered employers)	Wages × 15 × years of service ÷ 26
Years of service	A part year of more than 6 months counts as a full year
Eligibility	5 years' continuous service; 1 year for fixed-term employees; none on death or disablement
Not covered by the law	15/30 × average salary of the last 10 months × years

Tax on gratuity

Government employees: fully exempt
Private employees covered by the law: least of actual gratuity, the statutory formula amount and ₹20 lakh
The ₹20 lakh limit is a lifetime limit across employers
Any excess is taxable as salary; relief under Section 89 may apply

Worked example: 7 years 8 months of service

1Last drawn basic + DA: ₹60,000 a month.
2Service of 7 years 8 months is rounded up to 8 years.
3Gratuity = ₹60,000 × 15 × 8 ÷ 26 = ₹2,76,923.

Gratuity ≈ ₹2.77 lakh, fully tax-free (below ₹20 lakh).

Official sources

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