After how many years is gratuity payable?

After five years of continuous service for permanent employees, and after one year for fixed-term employees. The condition is waived on death or disablement.

How much gratuity is tax-free?

All of it for government employees. For others, up to ₹20 lakh over their working life is exempt under Section 19 (old section 10(10)); any excess is taxed as salary.

What is the maximum gratuity payable?

The statutory ceiling is ₹20 lakh. Employers may pay more under their own policy, but the extra is taxable.

Does the new labour code change gratuity?

The formula stays the same, but fixed-term employees now qualify after one year, and because basic pay must be at least 50% of total wages, gratuity amounts can be higher.

Salary & Retirement · Updated for tax year 2026-27

Gratuity Calculator

Gratuity is 15 days’ wages for every year of service: last drawn basic + DA × 15 × years ÷ 26. A final part-year of more than six months counts as a full year. Permanent employees qualify after five years and fixed-term employees after one year. Up to ₹20 lakh is tax-free for private-sector employees under Section 19 (old sec. 10(10)).

Enter your details

Values you enterComputed values

Last drawn basic + DA (monthly)

Date of joining

Last working day

Employer covered by gratuity law?

Employment

Government employee?

Result

Service10 yr 7 mo

Years counted11

Gratuity₹3,17,308

Tax-free₹3,17,308

Taxable₹0

Formula: 15 × last drawn salary × years of service ÷ 26.

Disclaimer: Computed to the best of our knowledge, as per the law — including the section changes under the Income-tax Act, 2025 — in force on the date this website was last deployed (28 Sep 2026). Results are estimates for guidance only and are not tax, legal or investment advice. Please verify with the Act, rules and notifications, or a qualified professional, before relying on them. Rates and limits last reviewed on 28 Sep 2026.

How to use the Gratuity Calculator

1
Enter your last drawn monthly basic salary plus dearness allowance.
2
Enter your joining date and your last working day.
3
Choose whether your employer is covered by the gratuity law, whether you are permanent or fixed-term, and whether you are a government employee.
4
The calculator shows the years counted, your gratuity and how much of it is taxable.

Gratuity formula

Covered employers: Gratuity = Last drawn (Basic + DA) × 15 × Years of service ÷ 26

(a final period of more than 6 months counts as a full year)

Not covered: Gratuity = Average (Basic + DA) of last 10 months × 15 × Completed years ÷ 30

Tax-free amount: Government employees — all of it; others — up to ₹20 lakh in a lifetime

The 26 in the formula is the number of working days in a month, so 15 ÷ 26 is half a month’s wages per year. The Code on Social Security, 2020, in force since November 2025, keeps this formula, caps the payout at ₹20 lakh and makes fixed-term employees eligible after one year.

Worked example

Joined on 1 January 2016, left on 1 August 2026: 10 years and 7 months. The 7 months count as a year, so 11 years.
Last drawn basic + DA = ₹50,000 a month. Gratuity = ₹50,000 × 15 × 11 ÷ 26 = ₹3,17,308.
It is below the ₹20 lakh limit, so the whole amount is tax-free.

When gratuity is paid

On retirement, resignation, termination, death or disablement. The five-year condition does not apply on death or disablement. Employers must pay within 30 days of it becoming due; late payment carries interest.

Frequently asked questions

Last drawn basic + DA × 15 × years of service ÷ 26, for employers covered by the law. Service of more than six months in the final year counts as a full year.