Gratuity Calculator: How It Works, Who Is Eligible, and Tax Details
Gratuity equals 15 days of wages for each year worked; a day's wage is a month's wage divided by 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 Service Years
Last Monthly Wage (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 are your last monthly basic pay with dearness allowance. Entering total pay assumes wages are at least 50% of it.
- Years counted are the total completed service years, with an extra year added if the remaining months exceed six. Both your joining date and last working day count towards service.
- Gratuity = 15 ÷ 26 × Wages × Years Counted.
- Eligibility is after 5 years of continuous service, or 1 year on a fixed-term contract. There is no requirement when service ends due to death or disablement.
- For private-sector employees, up to ₹20 lakh of gratuity is tax-free over their lifetime; amounts above are taxed as salary.
The rules come from the Code on Social Security, 2020, effective from 21 November 2025. This code retains the 15/26 formula from the Payment of Gratuity Act, 1972, and introduces the one-year rule for fixed-term workers and the 50% wage regulation.
When to Use the Gratuity Calculator
Use the Gratuity Calculator when you get a job offer or are considering a new position. First, verify your eligibility for gratuity based on your years of service. Next, enter your monthly wage to get an estimated gratuity amount.
This tool fits into your job search on Careerwood Jobs by helping you understand potential benefits. Compare this amount with other offers as you consider various roles. Before resigning, check your expected gratuity to plan your finances better.