/ Free Tool · Gratuity · Updated 2026-10-29

Gratuity Calculator 2026 Under the New Labour Codes (50% Wage Rule, 1-Year Fixed-Term), what you are owed, and how much is tax-free.

Calculate gratuity under the Code on Social Security, 2020: 15 days' wages for each year of service, with wages now at least 50% of total pay and fixed-term employees eligible after one year instead of five. Shows the tax-exempt and taxable parts.

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Written by CA Durgesh Chavda

Chartered Accountant (ICAI) · Founder, Bharat Quantum Prospera · NRI taxation, US incorporation, transaction due diligence, forensic audit, AEO, cross-border tax · LinkedIn

/ Calculator

Calculate your gratuity.

Inputs

All amounts in INR.

Employment type Fixed-term employees qualify after 1 year; permanent after 5.

Monthly basic pay + DA Last drawn.

Monthly total remuneration Gross monthly pay including all allowances.

Completed years of service

Additional months 0-11.

Reason for leaving Death or disablement removes the 5-year condition.

Employer Government employees' gratuity is fully tax-exempt.

Estimated gratuity

INR 0

Monthly wages used (after 50% rule)INR 0

Added to wages by the 50% ruleINR 0

Service countedINR 0

Tax-exempt (estimate)INR 0

Taxable (estimate)INR 0

/ How it is calculated

The rules behind the numbers.

Formula: monthly wages × 15 ÷ 26 × years of service.
50% wage rule: from 21 November 2025, basic pay plus DA must be at least 50% of total remuneration. If allowances exceed 50%, the excess is added back to wages for gratuity, PF and other statutory benefits.
Eligibility: permanent employees after 5 years of continuous service (not needed on death or disablement); fixed-term employees after 1 year, paid pro rata.
Rounding: for permanent employees, a part-year of more than six months counts as a full year.
Tax: gratuity of government employees is fully exempt; for others, exemption is limited to INR 20 lakh over the employee's lifetime.
The calculator gives an estimate; employer policies can be more generous.

/ For employers

What the codes change.

Salary structures with low basic pay now cost more in gratuity and PF; review CTC structures and provisions.
Fixed-term contracts of one year or more now carry a gratuity liability.
Foreign companies with Indian subsidiaries or employer-of-record arrangements should re-run actuarial provisions under Ind AS 19.

Sources: Aditya Birla Capital; Outlook Money.

Last updated: 29 October 2026. Check the Code text and Ministry of Labour notifications for your case.

/ Ready when you are

Want a CA to check the numbers?

Email durgesh@bharatquantumprospera.com or WhatsApp +91 78018 87130. Fixed-scope quote within 48 hours.

Get a firm quote → WhatsApp Durgesh

FAQ

Common questions, answered.

How is gratuity calculated under the new labour codes?

Monthly wages x 15/26 x years of service, where wages must be at least 50% of total remuneration. Fixed-term employees qualify after one year, permanent employees after five.

What is the 50% wage rule for gratuity?

Basic pay plus DA must be at least half of total pay. If allowances are more than 50%, the excess is treated as wages for gratuity and PF, which raises the gratuity amount.

Do fixed-term employees get gratuity after one year?

Yes. Under the Code on Social Security, a fixed-term employee becomes eligible after one year of service, paid pro rata.

How much gratuity is tax-free?

All of it for government employees. For others, up to INR 20 lakh over the employee's lifetime.

Can BQP review our payroll for the labour codes?

Yes: salary restructuring, gratuity and PF exposure, and Ind AS 19 provisions for Indian companies and foreign-owned subsidiaries. Email durgesh@bharatquantumprospera.com or WhatsApp +91 78018 87130. Fixed-scope quote within 48 hours.