What is gratuity?
Gratuity is a lump sum your employer pays when you leave after at least five years, retire, or if employment ends through death or disablement. Under the Code on Social Security, 2020, fixed-term employees also get it in proportion to their service.
How to use this calculator
- Enter your last monthly basic pay plus DA (add the excess if allowances are over half your pay).
- Enter your years and extra months of service.
- Choose your employer type and whether you are a fixed-term employee.
- Read the payable amount and how much of it is tax-free.
Gratuity by wages and years of service
| Monthly wages | 5 years | 10 years | 20 years |
|---|---|---|---|
| ₹30,000 | ₹86,538 | ₹1,73,077 | ₹3,46,154 |
| ₹50,000 | ₹1,44,231 | ₹2,88,462 | ₹5,76,923 |
| ₹75,000 | ₹2,16,346 | ₹4,32,692 | ₹8,65,385 |
| ₹1,00,000 | ₹2,88,462 | ₹5,76,923 | ₹11,53,846 |
Gratuity formula
Gratuity = Last monthly wages × 15 × Years of service ÷ 26
Years of service count a part-year of more than six months as a full year. The result is capped at ₹20 lakh. If your employer is outside the Code, the tax-free amount is instead half a month’s average salary (over the last ten months) for each completed year.
Worked example
Last wages ₹60,000 a month, 8 years 7 months of service, private employer: 7 months is more than six, so 9 years count. ₹60,000 × 15 × 9 ÷ 26 = ₹3,11,538, all of it tax-free.
Assumptions
- Wages are what you enter; apply the 50% rule yourself if your allowances are large (the CTC calculator does this for you).
- Seasonal and piece-rated work, and forfeiture for misconduct, are not modelled.
- The tax exemption uses the ₹20 lakh lifetime limit; enter any gratuity exempted in earlier jobs.