How is gratuity calculated in India?
Gratuity is 15 days' wages for every completed year of service, and a part year of more than six months counts as a full year. Wages means basic pay plus dearness allowance. For a monthly paid employee, 15 days' wages is usually worked out as monthly wages ÷ 26 × 15, the method set out in the Payment of Gratuity Act, 1972. So gratuity = last drawn basic + DA × 15 ÷ 26 × years. FixDoks's Gratuity Calculator applies this and shows each step.
Gratuity Calculator at a glance
| Inputs | Last drawn basic + DA, total pay (optional), years, months and days of service |
|---|---|
| Output | Gratuity amount, years counted, step by step working |
| Law | Code on Social Security, 2020, section 53 |
| Processing | In your browser; your files are not uploaded |
| Price | Free |
| Works on | Chrome, Edge, Safari and Firefox on Windows, Mac, Android and iPhone |
How to use Gratuity Calculator
- Enter your last drawn monthly basic pay plus DA. Leave out HRA, conveyance and other allowances.
- Optional: enter your total monthly pay. If allowances are more than half of it, the calculator raises the wages used, as the Code on Social Security requires.
- Enter your length of service in years, months and days.
- Choose Permanent or Fixed-term, then read the gratuity amount and the working below it.
The gratuity formula
Gratuity is a lump sum an employer pays when you leave after long service. The rule is in section 53 of the Code on Social Security, 2020, which replaced the Payment of Gratuity Act, 1972 when the four labour codes came into force on 21 November 2025. The basic rule did not change: the employer pays 15 days' wages for every completed year of service, based on the wages you last drew.
For a monthly paid employee, 15 days' wages is normally worked out as the monthly wages divided by 26 working days and multiplied by 15. That method was written into the Payment of Gratuity Act, which is why gratuity is often called the 15/26 formula:
Gratuity = last drawn (basic + DA) × 15 ÷ 26 × years of service
The Code itself says only "fifteen days' wages", so the calculator lets you switch to a 30 day month if your employer uses that. The 26 day method gives the higher figure.
The six month rounding rule
The law counts "every completed year of service or part thereof in excess of six months". So a part year of more than six months counts as a full year, and a part year of six months or less is ignored.
| Service | Years counted |
|---|---|
| 9 years 6 months | 9 |
| 9 years 6 months 1 day | 10 |
| 9 years 7 months | 10 |
| 10 years 3 months | 10 |
Worked example
Your last drawn basic pay plus DA is ₹50,000 a month and you served 10 years and 7 months.
- Years counted: 10 years 7 months is more than six months over 10, so 11 years.
- One day's wages: ₹50,000 ÷ 26 = ₹1,923.08
- Gratuity: ₹50,000 × 15 ÷ 26 × 11 = ₹3,17,308
With 10 years and 6 months instead, only 10 years count and the gratuity is ₹2,88,462.
What counts as wages
For gratuity, wages means basic pay, dearness allowance and any retaining allowance. House rent allowance, conveyance, overtime, commission, bonus and the employer's provident fund contribution are left out.
The Code adds a safeguard. If the excluded payments are more than half of your total pay, the amount above half is added back to wages. In practice, wages for gratuity cannot be less than half of your total pay. Enter your total monthly pay in the optional field and the calculator applies this rule for you.
Who gets gratuity, and when
- Five years of continuous service is the normal condition. Gratuity is paid on superannuation, retirement, resignation, death or disablement.
- Death or disablement: the five year condition does not apply. On death, gratuity goes to the nominee or legal heirs.
- Fixed-term employees: the five year condition does not apply when the contract ends, and gratuity is paid pro rata. The Government's announcement of the labour codes describes fixed-term employees as eligible after one year of continuous service.
- Seasonal establishments: an employee who does not work the whole year gets 7 days' wages for each season.
- Government employees covered by their own gratuity rules are outside this section of the Code.
The law also caps the amount at a figure notified by the Central Government, and an employer may always pay more under a contract or settlement. Gratuity can be forfeited, fully or partly, if you are dismissed for causing loss to the employer, for violent or disorderly conduct, or for an offence involving moral turpitude in the course of employment.
Is gratuity taxable?
Tax treatment depends on whether you are a government employee, how much you receive and the income tax rules for the year. Check the current rules or ask your employer's payroll team before you count on a tax-free amount.
Results are estimates for planning. Your employer, bank, fund or the tax department may round differently or apply other rules, so check the final figure with them.