Gratuity Calculator 2025: Retirement, Death and Fixed-Term Payout with Tax
Calculate your exact gratuity using the 15/26 formula, handle death gratuity slabs and the new fixed-term 1-year rule, and see your tax-exempt amount under Section 10(10) instantly.
Payment of Gratuity Act Model: 15/26 Formula and Statutory Payout Estimate
Big.js arithmetic, 7th CPC death gratuity slabs, Chart.js tax split visualGratuity in India: What It Is and How the Payout Actually Works
Gratuity is a lump-sum payment your employer makes to you as a reward for long and continuous service. It is not a bonus or a favour, it is a statutory right under the Payment of Gratuity Act, 1972, for employees of establishments with 10 or more workers.
Think of it as a thank-you cheque that grows with every year you stay, and for most salaried Indians it becomes one of the largest single payments they ever receive from an employer.
The amount is not arbitrary. It follows a precise legal formula tied to your last drawn Basic plus Dearness Allowance and your years of service. Yet a surprising number of employees either overestimate their gratuity by using gross salary
instead of Basic plus DA, or underestimate it by ignoring the 6-month rounding rule that can add lakhs. This calculator removes the guesswork and shows you the exact figure your employer owes, along with how much of it is tax-free.
Gratuity also sits alongside your provident fund, pension, and leave encashment as one of the four pillars of your retirement corpus. Unlike your PF, which you contribute to every month, gratuity costs you nothing during your career.
It is funded entirely by your employer and paid out in a single lump sum when you leave. Understanding how it is computed lets you plan your exit, verify your final settlement, and challenge any shortfall with confidence.
Who Is Eligible for Gratuity?
To claim gratuity on retirement or resignation, you generally need to complete 5 years of continuous service with the same employer. There are important exceptions. If an employee dies or becomes permanently disabled, the 5-year rule is completely waived and gratuity is paid regardless of tenure.
And under a major 2025 change, fixed-term contract employees now qualify for pro-rata gratuity after just 1 year of service.
The Act applies to factories, mines, oilfields, plantations, ports, railways, shops, and establishments employing 10 or more persons. Once an establishment crosses that threshold, it stays covered permanently, even if the headcount later falls below 10. This means an employee at a firm that once had 12 staff but now has 8 is still protected.
If you are unsure whether your employer is covered, check whether they deduct and remit provident fund, as PF coverage and gratuity coverage usually go together for establishments of this size.
This is the formula for employees covered under the Act. The 15 represents 15 days of wages earned per year of service, and 26 is the number of working days in a month (excluding Sundays). For employees not covered by the Act, the divisor changes to 30.
The 15/26 Formula Explained
The heart of the calculation is the fraction 15/26. The 15 means you earn 15 days of salary for each completed year of service, essentially half a month’s pay per year. The 26 is the statutory count of working days in a month, arrived at by removing the four Sundays from roughly 30 days.
So for every year you work, you bank half a month of Basic plus DA. Over a 20-year or 30-year career, this compounds into a substantial sum.
Because the divisor 26 is smaller than the calendar month, the effective daily wage used in the formula is slightly higher than your actual per-day pay. This is a deliberate feature of the law that works in the employee’s favour.
It is also why covered employees, who use 26, receive marginally more than non-covered employees using 30 for the identical salary and tenure. When you compare two offers or two settlement figures, always confirm which divisor was applied.
Only Basic + DA counts. Gratuity is calculated strictly on Basic Pay plus Dearness Allowance. HRA, conveyance, bonus, medical allowance, and special allowances are all excluded unless your company policy explicitly includes them. Under the new Wage Code, Basic must be at least 50 percent of CTC, which will increase gratuity for many employees whose Basic was previously kept artificially low.
The 6-Month Rounding Rule That Adds Lakhs
For employees covered under the Act, any service beyond a completed year that exceeds 6 months is rounded up to a full year. This is why 4 years and 8 months of service counts as 5 years, making you eligible for gratuity and adding a full year to your payout.
Conversely, 4 years and 5 months counts as only 4 years and, worse, does not even meet the 5-year eligibility threshold. This single rule can be the difference between receiving gratuity and receiving nothing, so timing your resignation matters.
The rounding rule works only on the portion beyond your last completed year, not on the total. If you have served 12 years and 7 months, the 7 months rounds up and your gratuity is computed on 13 years. If you served 12 years and 4 months, the partial period is dropped and you are paid for 12 years.
Over a long career, a well-timed exit that captures one extra rounded year can add the equivalent of half a month’s salary to your final cheque, which for a senior employee can run into lakhs.
Why Employers Sometimes Underpay Gratuity
Gratuity is a direct cost to the employer, so some organisations look for ways to minimise it. The most common tactic is keeping the Basic component of your salary artificially low, sometimes as little as 25 or 30 percent of CTC, and loading the rest into allowances that do not count toward gratuity.
Because gratuity is computed only on Basic plus DA, a low Basic dramatically shrinks your entitlement. This is precisely the practice the new Wage Code targets by mandating that Basic be at least half of total pay.
Another area of dispute is the definition of continuous service. Employers occasionally argue that breaks in service, unpaid leave, or a transfer between group companies reset the clock. Under the Act, continuous service has a specific legal meaning, and short breaks generally do not interrupt it. If your gratuity is
denied on grounds of a service break, the burden is on the employer to prove the break was genuine and legally sufficient to disqualify you. Keep copies of your appointment letter, salary slips, and any transfer or confirmation letters, as these establish an unbroken record of service that protects your claim.
Death Gratuity: The Different Slab System Most Calculators Ignore
When an employee dies while in service, the gratuity payable follows an entirely different structure from the standard 15/26 formula. This death gratuity is calculated using service-length slabs, and because it is paid to a grieving family who may not know their rights, understanding it correctly matters enormously.
Most online calculators do not compute this at all, which is why we built a dedicated death gratuity mode.
How Death Gratuity Slabs Work
Instead of the 15/26 formula, death gratuity pays a multiple of your monthly emoluments based on how long you served. If service was less than 1 year, the family receives 2 times monthly emoluments. From 1 to 5 years, it is 6 times. From 5 to 11 years, 12 times. From 11 to 20 years, 20 times.
And for 20 years or more, it is half a month’s emoluments for every completed 6-month period, subject to a maximum of 33 times monthly emoluments. This slab structure, revised by the 7th Central Pay Commission, ensures families of employees who die early in their careers still receive meaningful support.
No minimum service for death gratuity. Unlike retirement gratuity, death gratuity has no 5-year qualifying period. Even an employee who dies within their first few months of service leaves their nominee entitled to 2 times monthly emoluments. This is a crucial protection that families often do not know exists.
Who Receives the Death Gratuity?
Death gratuity is paid to the registered nominee. If no nomination was made, it goes to the legal heirs as defined under the Act. This is why every employee should file a nomination form (Form F) with their employer as soon as they join.
Without it, the family may face delays and disputes at the worst possible time. If you have never filed a nomination, do it this week.
A nomination can name more than one person and can specify the share each nominee receives. If you have a spouse, children, and dependent parents, you can distribute the death gratuity among them in whatever proportion you choose. Once children are born or your marital status changes, update Form F so it reflects your current family.
An outdated nomination naming a person who has since passed away or become estranged can trigger exactly the kind of family dispute the nomination was meant to prevent.
Death Gratuity for the 20-Year Slab
The final death gratuity slab, for 20 years or more of service, uses a completely different mechanism from the fixed multiples below it. Instead of a flat multiplier, it pays half a month’s emoluments for every completed 6-month period of service, capped at 33 times monthly emoluments.
So an employee with exactly 20 years has 40 completed half-year periods, giving 20 times emoluments, and the figure keeps rising with each additional 6 months until it hits the 33-times ceiling at around 33 years of service.
This ceiling matters for long-serving government staff. A 40-year veteran does not receive 40 times emoluments, because the 33-times cap binds first. Our death gratuity mode applies this cap automatically, so families see
the correct capped figure rather than an inflated number that the rules would never actually pay. Knowing the cap also helps families sanity-check the amount an employer or department proposes at a difficult time.
Gratuity Versus Provident Fund and Pension
People often confuse gratuity with provident fund or pension, but the three are distinct benefits with different rules. Provident fund is a monthly contribution from both you and your employer that grows with interest and is yours to withdraw when you leave or retire. Pension, where applicable, is a recurring monthly income after retirement. Gratuity is neither of these. It is a one-time lump sum funded solely by the employer, triggered by your exit after qualifying service.
Because these benefits are separate, receiving one does not reduce another. A retiring employee can draw provident fund, gratuity, leave encashment, and pension all at once, each governed by its own ceiling and tax treatment. When you plan your retirement corpus, count gratuity as an additional pillar rather than a substitute for your PF or pension. This is also why verifying each component separately in your final settlement statement matters, as an error in one does not show up in the others.
Gratuity Reference Tables for 2025 and 2026
These tables summarise the formulas, death gratuity slabs, tax exemption limits, and eligibility rules currently in force.
Gratuity Formula by Coverage Type
| Scenario | Formula | Divisor | Rounding Rule |
|---|---|---|---|
| Act-covered employee | 15 x (Basic+DA) x Years / 26 | 26 | 6+ months rounds up |
| Non-covered employee | 15 x (Basic+DA) x Years / 30 | 30 | Partial year ignored |
| Government employee | Per CCS Pension Rules | Varies | 6-month periods |
Death Gratuity Slabs (7th CPC)
| Length of Qualifying Service | Rate of Death Gratuity |
|---|---|
| Less than 1 year | 2 times monthly emoluments |
| 1 year to less than 5 years | 6 times monthly emoluments |
| 5 years to less than 11 years | 12 times monthly emoluments |
| 11 years to less than 20 years | 20 times monthly emoluments |
| 20 years or more | Half emolument per 6-month period, max 33 times |
Tax Exemption Limits under Section 10(10)
| Employee Category | Tax-Free Limit | Exemption Test |
|---|---|---|
| Government employee | Fully exempt (up to Rs 25 lakh) | No tax on gratuity received |
| Private, Act-covered | Rs 20,00,000 | Least of 3 amounts |
| Private, non-covered | Rs 20,00,000 | Least of 3 amounts |
The least-of-three test. For private employees, the tax-exempt gratuity is the lowest of: Rs 20 lakh, the actual gratuity received, or the amount computed by the formula. Any gratuity above the exempt figure is added to your income and taxed at your slab rate. The Rs 20 lakh ceiling is a lifetime cumulative limit across all employers, not per job.
Eligibility Rules by Scenario
| Scenario | Minimum Service | Notes |
|---|---|---|
| Retirement or resignation | 5 years | 4y 8m counts as 5y for covered employees |
| Death in service | None | 5-year rule fully waived |
| Permanent disablement | None | 5-year rule fully waived |
| Fixed-term contract (2025) | 1 year | Pro-rata, effective 21 Nov 2025 |
How the Tax Exemption Is Computed in Practice
Suppose a private-sector employee receives an actual gratuity of Rs 24 lakh, and the formula amount also works out to Rs 24 lakh. The exemption is the least of three figures: the Rs 20 lakh statutory ceiling, the Rs 24 lakh actually received, and the Rs 24 lakh formula amount.
The lowest is Rs 20 lakh, so that much is tax-free and the remaining Rs 4 lakh is added to salary income and taxed at the employee’s slab rate in the year of receipt.
Now consider someone who receives Rs 6 lakh with a formula amount of Rs 6 lakh. Here the least of the three is Rs 6 lakh, well under the ceiling, so the entire gratuity is tax-free and nothing is added to taxable income.
This is why most employees with moderate salaries and typical service lengths pay no tax on gratuity at all. The Rs 20 lakh ceiling only bites for high earners with long service, and even then only on the slice above the limit.
One subtlety many people miss is that the Rs 20 lakh is a lifetime figure. If you claimed Rs 8 lakh tax-free at an earlier employer, only Rs 12 lakh of exemption remains for all future gratuity.
Our calculator shows the exempt and taxable split for the current payout, but you should mentally subtract any exemption already used in past jobs to see your true remaining headroom.
Worked Gratuity Scenarios from Mumbai, Bengaluru and Kolkata Employees
These three examples show how gratuity plays out across retirement, the rounding edge case, and a death gratuity claim.
Rohan retires from a Mumbai manufacturing firm after 22 years with a last drawn Basic plus DA of Rs 60,000. His employer is covered under the Act, so the formula is 15 times 60,000 times 22 divided by 26, which equals Rs 7,61,538.
Since this is well below the Rs 20 lakh exemption limit, the entire amount is tax-free. Rohan receives the full Rs 7.62 lakh in his bank account with no deduction, a significant cushion for his retirement years.
Ananya plans to resign from her Bengaluru IT job after 4 years and 8 months. She assumes she gets nothing because she has not completed 5 years. But because her employer is covered under the Act, her 8 months beyond 4 years
rounds up to a full year, so her service counts as 5 years and she qualifies. Her gratuity is 15 times 45,000 times 5 divided by 26, equalling Rs 1,29,808. Had she resigned at 4 years 5 months, she would have received zero.
Sourav’s father, a Kolkata government employee with 14 years of service and monthly emoluments of Rs 50,000, passed away in service. Because death gratuity uses slabs rather than the 15/26 formula, and 14 years falls in the 11-to-20 year band, the family receives 20 times monthly emoluments, which is Rs 10,00,000.
This is entirely tax-free for a government employee. Had the standard retirement formula been wrongly applied, the family would have received far less, which is why knowing the death gratuity slabs is vital.
Six Practical Tips to Protect and Maximise Your Gratuity
File Your Nomination Form Immediately
Submit Form F to your employer naming your gratuity nominee as soon as you join. Without a nomination on file, your family faces delays and potential disputes if you die in service. This single form, which takes five minutes, can save your loved ones months of stress at the worst possible time. Update it after major life events like marriage or children.
Time Your Resignation Past 4 Years 6 Months
If you are covered under the Act and approaching the 5-year mark, do not resign before completing 4 years and 6 months. Beyond this point, the 6-month rounding rule counts your service as a full 5 years, making you eligible. Leaving even a few weeks earlier can cost you the entire gratuity. Check your exact joining date before submitting notice.
Verify Your Employer Uses Basic Plus DA
Gratuity is calculated on Basic plus Dearness Allowance, not gross salary or CTC. Some employers keep Basic artificially low to reduce their gratuity liability. Under the new Wage Code, Basic must be at least 50 percent of CTC, which will raise gratuity for many. When you receive your gratuity, cross-check the Basic plus DA figure your employer used against your payslips.
Know the Rs 20 Lakh Lifetime Ceiling
The Rs 20 lakh tax exemption for private employees is a lifetime cumulative limit across all your jobs, not per employer. If you received tax-free gratuity at a previous job, that amount counts against your Rs 20 lakh ceiling. Keep records of past gratuity received so you can correctly compute the taxable portion when you receive gratuity again from a future employer.
Claim Interest on Delayed Payments
Employers must pay gratuity within 30 days of it becoming due. If they delay beyond this, they owe you simple interest, typically around 10 percent per annum, on the overdue amount. Do not let a late payment slide. Send a written reminder citing the 30-day rule, and if unpaid, approach the Controlling Authority under the Act. As per the official labour framework, this is your legal right.
Fixed-Term Workers: Claim After One Year
If you are on a fixed-term contract that expired on or after 21 November 2025 and completed at least 1 year of service, you are now entitled to pro-rata gratuity under the Code on Social Security 2020.
This is a major change from the old 5-year rule. Many fixed-term employees do not know they qualify, so check your contract dates and claim what you are owed.
Gratuity Quick Reference for 2025 and 2026
| Question | Answer |
|---|---|
| Standard formula (covered) | 15 x (Basic+DA) x Years / 26 |
| Formula (non-covered) | 15 x (Basic+DA) x Years / 30 |
| Minimum service (retirement) | 5 years |
| Minimum service (death/disability) | None (waived) |
| Minimum service (fixed-term, 2025) | 1 year |
| Rounding rule (covered) | 6+ months rounds up to full year |
| Salary components counted | Basic + DA only |
| Tax exemption (private) | Rs 20,00,000 (lifetime) |
| Tax exemption (government) | Fully exempt, up to Rs 25 lakh |
| Exemption test | Least of 3: cap, actual, formula |
| Death gratuity, under 1 year | 2x emoluments |
| Death gratuity, 11 to 20 years | 20x emoluments |
| Death gratuity, 20+ years | Max 33x emoluments |
| Payment deadline | Within 30 days of due date |
| Delayed payment interest | Around 10% per annum |
| Governing law | Payment of Gratuity Act, 1972 |
Frequently Asked Questions on Gratuity
How is gratuity calculated in India?
What is the minimum service required for gratuity?
Is gratuity calculated on gross salary or basic salary?
What is the maximum tax-free gratuity limit?
How is death gratuity different from retirement gratuity?
Does 4 years and 8 months qualify for gratuity?
Can fixed-term or contract employees get gratuity?
What happens if my gratuity exceeds Rs 20 lakh?
Is gratuity taxable for government employees?
When must my employer pay gratuity?
Can an employer refuse to pay gratuity?
Does gratuity apply if my company has fewer than 10 employees?
How does the new Wage Code affect gratuity?
Can I get gratuity from multiple employers?
What is the difference between the divisor 26 and 30?
Is DA always included in gratuity calculation?
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Disclaimer and Editorial Transparency
This gratuity calculator is provided for educational and illustrative purposes only. Calculations use the formulas and limits under the Payment of Gratuity Act, 1972, the Code on Social Security, 2020, and Section 10(10) of the Income Tax Act, as applicable for 2025 and 2026.
Death gratuity slabs follow the 7th Central Pay Commission structure for government employees. The new fixed-term gratuity rule reflects the Code on Social Security provisions notified in November 2025, which remain subject to state-level implementation.
Gratuity is calculated on Basic plus Dearness Allowance only. This tool provides an estimate and does not account for every company-specific policy, forfeiture scenario, or special circumstance. It does not constitute legal or tax advice.
Your employer’s final figure and any dispute are decided by the Controlling Authority appointed under the Act. For your specific situation, consult a qualified professional and verify figures against official sources.
Official gratuity and provident fund frameworks are available at epfindia.gov.in and labour regulations at labour.gov.in. CalcWise.Finance receives no compensation for calculator results and performs all computations locally in your browser without storing any personal financial data.