Gratuity calculator
The statutory 15/26 formula, with every step shown — including the six-month rounding rule and the ₹20 lakh ceiling that most calculators leave out.
How much gratuity am I owed?
Gratuity is fifteen days' wages for every completed year of service, based on the wages you last drew. For a monthly-rated employee the statute divides your monthly wages by 26, not 30 — so the formula is (monthly wages ÷ 26) × 15 × completed years.
What “wages” means depends on your last working day. Before 21 November 2025 it is Basic + DA only. From that date the labour codes apply the Code on Wages definition: still Basic + DA, but if your excluded allowances come to more than half of your total monthly pay, the excess over half is added back into the wage base — which raises the gratuity on an allowance-heavy salary structure.
One rule is unchanged by the date: a part-year in excess of six months counts as a full year, so 7 months rounds up but exactly 6 does not. The statutory entitlement is capped at ₹20 lakh.
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- What you need
- Last working day, last drawn Basic + DA and allowances, years of service
Gratuity calculator
The statutory formula, with the 15/26 arithmetic shown
The labour codes changed what counts as “wages” from 21/11/2025. Exits on or after that date are computed under the new definition, which can raise the figure.
Basic salary plus dearness allowance. Do not include HRA, bonus, commission or overtime here — put those in the next field.
More than six rounds up to a full year.
It generally applies to establishments with ten or more employees. Employers paying gratuity voluntarily, outside the statute, commonly use a 30-day divisor, which produces a lower figure.
Key takeaways
- →The formula is (monthly wages ÷ 26) × 15 × completed years. The 26 divisor is in the statute and works in your favour.
- →Exit before 21 Nov 2025: wages means Basic + DA only. HRA, bonus, commission and overtime are excluded.
- →Exit from 21 Nov 2025: wages is still Basic + DA, but excluded allowances above half your total pay are added back — which can raise the figure substantially.
- →A part-year of more than six months rounds up to a full year — but only for the amount, not for eligibility.
- →The statutory entitlement is capped at ₹20 lakh (s.4(3) of the 1972 Act; s.53 of the Code). Employers may pay more contractually.
- →Employers outside the statute commonly divide by 30, producing roughly 13% less.
How the formula works
Section 4(2) of the Payment of Gratuity Act 1972 — and, for exits on or after 21 November 2025, section 53 of the Code on Social Security 2020 — says that for every completed year of service, or part of a year in excess of six months, the employer pays gratuity at the rate of fifteen days' wages based on the rate of wages last drawn. Both then add the same mechanical bit: in the case of a monthly-rated employee, fifteen days' wages are calculated by dividing the monthly rate of wages last drawn by twenty-six and multiplying the quotient by fifteen.
gratuity = (monthly statutory wages ÷ 26) × 15 × completed years
The 26 is the part people query most. It exists because the statute treats a month as twenty-six working days — thirty days less four weekly offs — rather than as thirty calendar days. Dividing by a smaller number gives a larger daily rate, so this convention is in your favour, and it is why a gratuity calculator that divides by 30 will quietly under-pay you by about thirteen per cent.
What counts as “wages” changed on 21 November 2025
The arithmetic above is stable. The input is not. The four labour codes came into force on 21 November 2025, and from that date gratuity is computed on the definition of wages in section 2(y) of the Code on Wages, 2019 rather than the narrower Payment of Gratuity Act meaning. The test is your exit date, not the period your service fell in: the Ministry of Labour & Employment's Additional FAQs on the Labour Codes (as on 16.03.2026) confirm at Q6 that gratuity on the revised definition applies with effect from 21.11.2025, and at Q17 that it is computed on the rate of wages last drawn at an exit occurring on or after that date. Service before 21 November 2025 is not carved out and costed separately.
| Exit before 21 Nov 2025 | Exit from 21 Nov 2025 | |
|---|---|---|
| Governing law | Payment of Gratuity Act 1972, s.4 | Code on Social Security 2020, s.53, reading Code on Wages s.2(y) |
| Wages means | Basic + DA (+ retaining allowance) | Basic + DA (+ retaining allowance), plus an add-back |
| Other allowances | Excluded outright | Excluded only up to half of total remuneration; the excess over half is added back |
| Annual performance bonus | Excluded | Excluded, and outside the 50% test (MoLE FAQ Q4) |
| Divisor | 26 | 26 |
The add-back works on a single line of arithmetic. Take everything excluded from wages — HRA, conveyance, special allowance, overtime. If that total exceeds half of your total monthly remuneration, the excess over half is treated as wages:
add-back = max(0, excluded allowances − 50% of total remuneration)
wages = Basic + DA + retaining allowance + add-back
Where it bites, the wage base lands at exactly half of total remuneration — which is the intended effect of the proviso, and the reason an allowance-heavy structure no longer suppresses gratuity the way it used to. If your Basic + DA is already half your pay or more, nothing is added back and your figure is unchanged.
Four worked examples
| Situation | Wages used | Years used | Gratuity |
|---|---|---|---|
| Straightforward. Ten years exactly, covered by the statute, Basic + DA already above half of total pay. | ₹50,000 | 10 | ₹2,88,462 |
| Rounding up. Same person at 10 years 7 months — the part-year exceeds six months. | ₹50,000 | 11 | ₹3,17,308 |
| The add-back, exit from 21 Nov 2025. Ten years, Basic + DA ₹40,000 against ₹80,000 of other allowances. Total pay ₹1,20,000, so the wage floor is ₹60,000 and ₹20,000 is added back. Before 21 Nov 2025 the same person would have been paid on ₹40,000 — that is ₹2,30,769. | ₹60,000 | 10 | ₹3,46,154 |
| Hitting the ceiling. Forty years at ₹1,00,000 — the formula gives ₹23,07,692. | ₹1,00,000 | 40 | ₹20,00,000 |
The second row is worth ₹28,846 and turns on seven months rather than six. The third is worth ₹1,15,385 and turns on nothing but the date you leave. If you are close to either line and can choose your exit date, it is worth the arithmetic.
Where people get it wrong
Using gross salary as the wage base
Wrong under both frameworks, though for different reasons. Before 21 November 2025 wages is Basic + DA and allowances are excluded outright. From that date allowances count only to the extent they exceed half your total pay — which is an add-back, not a switch to gross. On a typical structure, running the formula on full gross still overstates the answer substantially.
Assuming Basic + DA is still the whole answer after 21 November 2025
The mirror-image error, and it costs you money rather than embarrassing you. If your Basic + DA is under half your total monthly pay and you left on or after 21 November 2025, part of your allowances belongs in the wage base. A calculator still hard-coded to Basic + DA will understate your gratuity.
Splitting service across the two frameworks
The test is the exit date, not the service period. MoLE FAQ Q17 puts gratuity on the rate of wages last drawn at an exit on or after 21.11.2025 — there is no pro-rating of pre-Code and post-Code service across one period of employment.
Applying the six-month rounding to eligibility
Rounding lives in the amount provision, not the eligibility one. It does not lift 4 years 7 months over the five-year eligibility threshold — that is a different test with its own contested edge case.
Dividing by 30 when the statute applies
If your employer is covered, the divisor is 26. Using 30 costs you about 13% of the entitlement — the same gap read the other way round is the 15% that dividing by 26 adds.
Assuming the ceiling is a tax limit
The ₹20 lakh statutory ceiling caps what is payable under the statute. The income-tax exemption is a separate least-of test that happens to have ₹20 lakh as one of its limbs. They are not the same rule, and the tax one often binds lower.
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Frequently asked questions
How is gratuity calculated in India?+
Why is gratuity divided by 26 and not 30?+
What salary is used for gratuity calculation?+
Does 4 years 7 months count as 5 years for gratuity?+
What is the maximum gratuity payable?+
Is gratuity taxable?+
Sources for the figures on this page
Maximum gratuity payable under the Payment of Gratuity Act
Payment of Gratuity Act 1972, s.4(3), read with notification S.O. 1420(E) dated 29 March 2018 (Payment of Gratuity (Amendment) Act, 2018)
View sourceChecked 2026-08-11
Income-tax exemption ceiling on gratuity for non-government employees
Income-tax Act 1961, s.10(10); CBDT Notification No. 16/2019 (S.O. 1213(E)) dated 8 March 2019
View sourceChecked 2026-08-11
Written and reviewed by Deepak Middha, Chartered Accountant (ICAI, India) and founder of LayoffNext.
Deepak Middha is the founder of LayoffNext and a Chartered Accountant (ICAI, India). A U.S. immigrant with nearly 20 years of experience — and 17 years in hedge fund and private equity administration, including as Vice President of Fund Accounting at NAV Fund Administration Group and Associate Director of Private Equity and Real Estate at SS&C Technologies — he builds free, plain-language layoff tools and guides for employees, H-1B workers, and immigrant families.