# Gratuity Calculator 2026: Labour Codes and Tax > Gratuity calculator with the 15/26 formula, service rounding, the Labour Codes' 50% wage rule and fixed-term eligibility, plus the INR 20 lakh tax-free cap. Source: https://trykosh.com/tools/gratuity-calculator Free tool - Salary and retirement # Gratuity calculator under the new Labour Codes Gratuity is a lump sum your employer pays when you leave after long service. Enter your last basic + DA and years of service to see the amount, how the new Labour Codes change it, and how much is tax-free. Rules checked 25 October 2026Free - no sign-upRuns in your browser Gratuity INR 3,11,538 15/26 x INR 60,000 x 9 years Years counted**9** Tax-free**INR 3,11,538** Taxable**INR 0** Basic + DA a month INR 60,000 50% of total pay INR 60,000 Wages for gratuity (basic + DA already above 50%) INR 60,000 Service 8 years 7 months Years counted (over 6 months rounds up) 9 15 days' wages per year (wage / 26 x 15) INR 34,615 Gratuity INR 3,11,538 Gratuity uses a 26-day month, so each year of service is worth a little more than half a month's basic + DA. ## Upload your statement and Kosh does this for you. Upload your statements and Kosh maps your salary, PF and savings, then tells you whether you're on track for retirement, month by month. [Start free](/signup?via=tool-gratuity-calculator) ## How the gratuity calculator works For employers covered by the law, which in practice means most with 10 or more employees, gratuity is 15 days' wages for every year of service. A month is taken as 26 working days, so the formula is 15 / 26 x last drawn monthly wages x years of service. Wages here means basic pay plus dearness allowance. Years of service are rounded: a final part-year of more than six months counts as a full year, and six months or less is dropped. So 8 years 7 months counts as 9 years, while 8 years 6 months counts as 8. Permanent employees qualify after five years of continuous service; on death or disablement there is no minimum. The Code on Social Security, 2020, in force with the other Labour Codes from 21 November 2025, makes two changes that matter here. Fixed-term employees now qualify after one year instead of five. And 'wages' must be at least half of total pay: if allowances such as HRA, conveyance and special allowance exceed 50% of your pay, the excess is added back to wages. Many salary structures pay basic at 30-40% of pay, so this rule can lift gratuity noticeably. Switch it on and enter your total monthly pay to see the effect. If your employer is not covered, gratuity is at its discretion. The tax-free amount is then half a month's average salary (basic + DA over the last 10 months) for each completed year, with no rounding up. For private-sector employees, gratuity is tax-free up to a lifetime limit of INR 20 lakh; anything above is taxed as salary. Government employees' gratuity is fully exempt and follows separate rules not modelled here. Gratuity = 15 / 26 x last monthly basic + DA x years of service Years of service completed years, plus one if the remaining part-year is over 6 months Basic + DA under the Labour Codes, at least 50% of total monthly pay ## Worked example: Lakshmi, leaving after 11 years 9 months Lakshmi's basic + DA is INR 72,000 a month, but her total fixed pay is INR 1,80,000, so basic is only 40% of it. Under the Labour Codes, wages for gratuity rise to half her pay, INR 90,000. Her 11 years 9 months of service count as 12 years. Her gratuity is 15 / 26 x INR 90,000 x 12 = INR 6,23,077, all of it tax-free. The 50% rule alone adds INR 1,24,615 compared with using her basic. Gratuity INR 6,23,077 15/26 x INR 90,000 x 12 years Years counted**12** Tax-free**INR 6,23,077** Taxable**INR 0** Basic + DA a month INR 72,000 50% of total pay INR 90,000 Wages for gratuity (raised to the 50% floor) INR 90,000 Service 11 years 9 months Years counted (over 6 months rounds up) 12 15 days' wages per year (wage / 26 x 15) INR 51,923 Gratuity INR 6,23,077 The 50% wage rule raises the wage used from INR 72,000 to INR 90,000, adding INR 1,24,615 to your gratuity. [Load this example into the calculator ->](?basic=72000&years=11&months=9&gross=180000#calculator) ## Good to know - The INR 20 lakh tax exemption is a lifetime limit for private-sector employees. If you claimed exempt gratuity from an earlier employer, only the balance is available now. - Some courts have counted four years and 240 days of work in the fifth year as five years of continuous service. If you are close to the line, check with your HR or a labour lawyer. - Employers must pay gratuity within 30 days of it becoming due, or pay simple interest on the delay. - Your CTC may show gratuity at about 4.81% of basic. That is a provision, not money you receive each year: it is paid only if you qualify when you leave. - Fill in the gratuity nomination form with your employer. On death, gratuity goes to the nominee without the five-year condition. ## Frequently asked questions How is gratuity calculated? For covered employers: 15 x last drawn monthly basic + DA x years of service / 26. A final part-year over six months counts as a full year. For example, INR 50,000 basic + DA and 10 years gives 15 x 50,000 x 10 / 26 = INR 2,88,462. Is gratuity payable after 4 years 8 months? Usually not for a permanent employee, because the law requires five years of continuous service. Some courts have treated four years and 240 working days in the fifth year as enough. The rounding rule for over six months applies to calculating the amount once you qualify, not to meeting the five-year condition. What changed in gratuity under the new Labour Codes? From 21 November 2025, fixed-term employees qualify after one year of service, and 'wages' must be at least 50% of total pay, so allowances above half of pay are added back to basic for gratuity. Both changes can increase what you receive. Is gratuity taxable? For private-sector employees, gratuity is tax-free up to INR 20 lakh over your working life, and any excess is taxed as salary at your slab rate. For central and state government employees, it is fully exempt. What is the maximum gratuity limit? The statutory ceiling for private-sector employees is INR 20 lakh. An employer may choose to pay more, but the amount above INR 20 lakh is taxable. Central government employees have a separate, higher ceiling. Do fixed-term or contract employees get gratuity? Fixed-term employees hired directly on a fixed-term contract now qualify after one year under the Code on Social Security, 2020, on a pro-rata basis. Workers employed through a contractor are covered by the contractor's own gratuity obligations. ## Sources and assumptions - [Ministry of Labour and Employment](https://labour.gov.in/) - [Income Tax Department](https://www.incometax.gov.in/) Rules and rates last checked on 25 October 2026. Results are estimates for planning and education, not tax, legal or investment advice. Kosh is an educational financial planning tool by Primedepth Labs. It is not a SEBI-registered investment adviser and does not offer personalised investment advice, hold your money or execute trades. 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