Gratuity Calculator (New Labour Code 2026)
15/26 gratuity with the labour-code wage rule, the ₹20 lakh tax-free cap, and gratuity after 1 year for fixed-term staff. Calculated instantly in your browser.
Last updated: · Labour-code wages, the 1-year rule for fixed-term staff, and the ₹20 lakh tax exemption
Saved scenarios (0)
- Saved only in this browser.
Your result
Gratuity payable
₹2,88,462
- Formula amount before the ₹20L cap
- ₹2,88,462
- Tax-free amount
- ₹2,88,462
- Taxable amount
- ₹0
- Years counted
- 10
- Eligible now
- Yes
- Service counts as 10 years (10 completed).
- The ₹20 lakh figure is the statutory ceiling and the lifetime tax-free cap across employers. Government gratuity is treated as fully exempt; service rules can differ from 15/26.
- Gratuity received was left at 0, so the tax split uses the formula payout.
Payout and tax split
| Item | Amount |
|---|---|
| Monthly wages used for the payout | ₹50,000 |
| Monthly basic + DA used for the tax formula | ₹50,000 |
| 15/26 (or 7/26) formula, before cap | ₹2,88,462 |
| Statutory payout (capped at ₹20 lakh) | ₹2,88,462 |
| Amount treated as received | ₹2,88,462 |
| Tax-free | ₹2,88,462 |
| Taxable | ₹0 |
Disclaimer: Estimate only. The labour-code wage and the tax-exemption salary are not always the same number. Confirm with your employer or a CA before you treat the tax-free figure as final.
How it's calculated
Wages = basic + DA, plus any allowances above 50% of total pay
Years = completed years + 1 if extra months are more than 6
Gratuity = wages × 15/26 × years, capped at ₹20,00,000
Tax-free = lowest of amount received, the salary formula, and ₹20 lakh (government: fully exempt)
A monthly basic plus DA of ₹50,000 and 10 years of service gives ₹50,000 × 15/26 × 10 = ₹2,88,462, all of it under the ₹20 lakh tax-free cap. The payout uses labour-code wages. The tax formula still uses basic plus DA. If allowances inflate the payout base, you can be paid more than the tax exemption covers.
Assumptions
- Monthly-rated employee, with 26 working days in the divisor. Seasonal establishments can switch to 7 days.
- The ₹20 lakh ceiling is the figure in the Ministry of Labour FAQs and the tax exemption.
- Fixed-term eligibility after 1 year follows the Code on Social Security rules notified in 2025.
- Death or disability waives the minimum service.
- Not legal, tax or employment advice. Confirm the payout and the taxable slice with your employer or a CA.
How to use this calculator
- Enter last drawn basic and DA. Use the monthly basic plus dearness allowance on the last salary.
- Add other allowances. Allowances excluded from wages matter only if they are more than half of total pay.
- Enter service. Completed years, plus extra months. More than six months rounds the year up.
- Pick the employment type. Permanent staff need 5 years. Fixed-term staff need 1. Government gratuity is fully tax-exempt here.
- Read the tax split. Compare the labour-code payout with the tax-free amount. Confirm both if they differ.
Frequently asked questions
What is the gratuity formula?
For a monthly-rated employee covered by the gratuity law: last drawn wages × 15 ÷ 26 × years. Wages start as basic plus DA. If allowances that are excluded from wages are more than half of total pay, the excess is added back. More than six extra months rounds the year up. Seasonal establishments use 7 days instead of 15.
Is 4 years 7 months counted as 5 years?
Yes, for employees covered by the gratuity law. More than six extra months rounds up, so 4 years and 7 months counts as 5. Four years and 6 months stays at 4, and the 5-year qualifying mark is missed.
Do fixed-term employees get gratuity after 1 year?
Yes. Under the labour codes a fixed-term employee qualifies after one year. Permanent staff still need five years, unless they leave because of death or disability.
What changed under the new labour codes?
The payout uses the Code on Social Security definition of wages, including the rule that pulls allowances back in once they cross half of pay. Fixed-term staff qualify after one year. The tax exemption still refers to salary as basic plus DA. When those two bases differ, this page shows both.
Is gratuity taxable?
Government employees: treated as fully exempt here. Employees covered by the gratuity law: exempt up to the lowest of the amount received, 15/26 of last drawn salary times the years, and ₹20 lakh. Employees outside the law: exempt up to the lowest of the amount received, half a month's salary times completed years, and ₹20 lakh. The ₹20 lakh cap is across employers over a lifetime. The rest is taxed at your slab. The exemption you know is section 10(10).
What is the maximum gratuity?
The ceiling used here is ₹20 lakh, which is both the statutory payout cap in the Ministry of Labour FAQs and the tax-free limit. An employer can pay more. The extra is generally taxable.
What if the employer refuses or delays payment?
The gratuity law expects payment within 30 days of it becoming payable, and interest can run after that. A dispute goes to the controlling authority under the labour department. This calculator does not decide whether a particular employer is covered.
Related calculators
Results from FinanceChacha are estimates for planning and education, not financial, tax or legal advice.