Gratuity Calculator India 2025Formula, Eligibility & Rules (Nov 21 Update)

Effective November 21, 2025, under the new Code on Social Security, **Fixed-Term Employees (contractual staff)** are eligible for gratuity after completing just **1 year of continuous service**. You no longer need to wait for the standard 5-year period applicable to permanent employees. This ensures pro-rata gratuity benefits for short-term contracts.

Yes, in most cases. The Madras High Court (Mettur Beardsell Ltd vs. Regional Labour Commissioner) ruled that completing **4 years and 240 days** (approx. 4 years and 8 months) in the fifth year counts as 5 full years for gratuity eligibility. However, this applies to permanent employees; Fixed-Term employees are eligible after just 1 year.

Under the new Code on Wages, 2019, your 'Basic Salary + DA' must constitute at least **50% of your total CTC**. If your employer structures your salary with higher allowances (like HRA/Special Allowance) to lower the Basic, the excess amount is now added back to your 'Wages' for gratuity calculation. This typically results in a **higher gratuity payout** for employees.

The official formula under the Act is: **(15 × Last Drawn Salary × Completed Years) / 26**. Here, 'Last Drawn Salary' = Basic Pay + Dearness Allowance (DA). The number '26' represents the working days in a month. For companies NOT covered under the Act, the divisor changes to 30.

Gratuity is strictly calculated on **Basic Salary + Dearness Allowance (DA)**. It is NOT calculated on Gross Salary or CTC. Components like HRA, Conveyance, Bonus, and Special Allowance are excluded unless the new '50% Wage Rule' forces a restructuring of your salary.

For private sector employees, the maximum tax-free gratuity limit is **₹20 Lakhs** over a lifetime. Any amount exceeding this is taxable as 'Income from Salary'. Government employees enjoy a 100% tax exemption with no upper monetary cap.

Yes. If you resign after completing the eligibility period (5 years for permanent, 1 year for fixed-term), claiming gratuity is your **statutory right**. Your employer cannot deny it citing 'voluntary resignation'. It must be paid within 30 days of your last working day.

The fraction **15/26** represents **15 days of wages** for every completed year of service. The law assumes a standard month has **26 working days** (excluding 4 Sundays). This logic ensures you receive half a month's salary for every year served.

In the event of death or disablement, the **mandatory service period (5 years or 1 year) is waived**. The full gratuity amount, calculated up to the date of death, must be paid immediately to the employee's nominee or legal heir.

Yes, companies usually include gratuity in the CTC (Cost to Company) structure, typically accrued at **4.81% of your Basic Salary** annually. However, you strictly receive this amount only *after* meeting the eligibility criteria (exit after 5 years or 1 year for FTE).

If you have worked for **more than 6 months** in your final year, it is rounded **UP** to the next full year (e.g., 5 years 7 months = 6 years). If you worked 6 months or less, it is rounded **DOWN** (e.g., 5 years 4 months = 5 years).

If payment is delayed beyond 30 days, the employer is liable to pay **simple interest** (govt notified rate). If they refuse, you can file 'Form I' with the **Controlling Authority** (Assistant Labour Commissioner) in your jurisdiction to recover the dues legally.