What will your gratuity actually be?

Under the Payment of Gratuity Act, 1972: Gratuity = (15 × your last drawn monthly Basic + DA × years of service) / 26. The 15 stands for 15 days' wages per completed year of service, and 26 is the assumed working days in a month. A part-year in excess of six months rounds up to a full year for this formula (e.g. 5 years 7 months counts as 6 years); exactly six months or less does not round up.

The standard rule is 5 years of continuous service (Section 4(1) of the Act), waived entirely if you're leaving due to death or permanent disability. Fixed-term employees are different: under the new labour codes (effective 21 November 2025), they're eligible after just 1 year. There's also a genuine grey area around 4 years 8 months onward — several High Court rulings have held that completing 240 actual working days in your final year counts as a full year of "continuous service," which can make you eligible before the 5-year mark, though this isn't applied uniformly by every employer.

For non-government employees, gratuity is tax-exempt up to ₹20,00,000 (Section 10(10)(ii) of the Income Tax Act) — anything received above that is taxable as salary income. Two things people often miss: this ₹20,00,000 figure is also the Payment of Gratuity Act's own statutory ceiling on what's payable under the Act (some employers pay more as policy, but that excess is taxable), and the exemption is a lifetime cap across every employer you've ever worked for, not a fresh allowance at each job.

Because the honest answer sometimes is "it depends." The 5-year rule is clear-cut once you've crossed it, and equally clear-cut well before 4 years 8 months. In between, eligibility genuinely turns on court interpretations of "continuous service" and how your specific employer applies them — so this tool flags that window as borderline and tells you to confirm with HR, rather than guessing a number it can't back up.

This calculator models the common case: a non-government employee at an establishment covered by the Payment of Gratuity Act (any establishment with 10 or more employees, which covers the large majority of white-collar employers). Government employees have separate, uncapped exemption rules, and employees at establishments not covered by the Act use a different formula (average of the last 10 months' salary, no 26-day divisor) — neither is modeled here.