Calculators

Gratuity Calculator

Calculate your gratuity payout online after the New Labour Code 2025 update

What is Gratuity?

Gratuity is a lump-sum payment made by an employer to an employee in recognition of long-term service.

The 1 Finance Gratuity Calculator helps you calculate gratuity online by applying the correct calculation method and relevant provisions of the Income-tax Act, 1961, based on your employment coverage—quickly and accurately, in line with the Payment of Gratuity Act, 1972 and the latest changes under the New Labour Codes.

Employment Details

₹
Select Date of Joining
Select Date of Employment End
Is your employer covered under the Payment of Gratuity Act, 1972?
Are you employed on a fixed-term contract?Employment contract with predefined start and end dates.
Are you a government employee?Government employees include central, state, and local authorities.

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All you need to know about gratutity calculator

TABLE OF CONTENT

What is gratuity?How is gratuity calculated?Who is eligible for gratuity?When is gratuity paid?How is gratuity tax exemption calculated?How does the 1 Finance Gratuity Calculator work?FAQ
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Understanding gratuity

Gratuity is money your employer pays you as a gratitude for your years of service. It is typically paid upon retirement, resignation after the minimum qualifying period, or completion of a fixed-term employment contract.


Changes in gratuity rules after New Labour Codes

The New Labour Codes notifies changes to gratuity rules in India, including gratuity eligibility for fixed-term employees and expanded coverage of establishments. The gratuity is calculated as per latest changes notified under the New Labour Codes.

How is gratuity calculated?

1.

When employee is covered under the Payment of Gratuity Act

Formula

Gratuity =
15
26
× Last Drawn Monthly Wages × Completed Years of Service

Calculation rules

•

Last Drawn Monthly Wages: Basic + Dearness Allowance+ Retaining Allowances where, monthly wages must be at least 50% of Total Remuneration

•

26 is taken as the number of working days in a month

•

If service period includes more than 6 months, it is rounded up to the next full year

Example

•

Last drawn Total Monthly Remuneration is ₹80,000

•

Monthly wages for gratuity (50% of remuneration): ₹80,000 × 50% = ₹40,000

•

Service: 6 years 9 months → 7 years

(15 × 40,000 × 7)
26
= ₹1,61,538
2.

When employee is not covered under the Payment of Gratuity Act

Formula (commonly used)

Gratuity =
15
30
× Last Drawn Monthly Wages × Completed Years of Service

Calculation rules

•

Salary considered: Basic Salary (or salary as per company policy) where, basic salary shall be 50% of the total remuneration.

•

30 days taken as a full month

•

No statutory rounding rule; years are taken as per employer policy

Example

•

Last Drawn Total Monthly Remuneration : ₹80,000

•

Service: 7 years

(15 × 40,000 × 7)
30
= ₹1,40,000

Who is eligible for gratuity?

Covered under the Payment of Gratuity Act, 1972

Private-sector employees in establishments with 10 or more employees

Employees with at least 5 years of continuous service (1 year of service in case of fixed term employees who has worked more than 240 days)

Example: An IT professional with 7 years of service whose employer is legally required to pay gratuity


Not covered under the Payment of Gratuity Act, 1972

Employees in small companies or startups with fewer than 10 employees

Example: A contract worker in a small retail store with 3 years of service; gratuity is contractual, not statutory


Example of gratuity calculation:

Employee type:

Private sector employee covered under the payment of Gratuity Act

Last drawn salary (basic + DA): ₹50,000 per month

Completed years of service: 7 years

Gratuity formula (covered employees):

Applicable Gratuity Formula

Gratuity =
15
26
× Last Drawn Monthly Wages × Completed Years of Service

Calculation

=
15
26
× 50,000 × 7
= 28,846 × 7
=
₹2,01,922

When is gratuity paid?

On resignation or retirement after meeting eligibility

On completion of a fixed-term contract

Immediately in case of death or disablement


Tax benefits on gratuity:

Government employees: The gratuity they receive is fully exempt from tax under Section 10(10)(i) of the Income-tax Act, 1961

Private sector employees covered under the Act: Tax exemption under Section 10(10)(ii)

Employees not covered under the Act: Gratuity paid as per company policy; tax exemption under Section 10(10)(iii)

How is gratuity tax exemption calculated?

If covered under the Payment of Gratuity Act, 1972


Gratuity = (Last drawn wages × 15 × Completed years of service) ÷ 26


Last drawn wages include basic salary + DA

Rounding rules applied as per the Act

Tax exemption calculated under Section 10(10)(ii) of the Income-tax Act, 1961


If not covered under the Payment of Gratuity Act, 1972


Gratuity is calculated as per company policy or industry practices

Tax exemption under Section 10(10)(iii) of the Income-tax Act, 1961

Exemption is the least of:
•

Actual gratuity received

•

₹20,00,000 (lifetime limit)

•

Half month’s average salary × completed years of service

The calculator shows estimated gratuity and taxable portion for non-covered employees.

How does the 1 Finance Gratuity Calculator work?

By entering a few simple details, you can instantly check your gratuity:

Employment start and end date

Last drawn wages as per the latest labour laws

Coverage under the Payment of Gratuity Act (Yes / No)

Nature of employment – regular or fixed-term

The calculator:

Applies the correct formula for your category

Computes completed years of service

Shows tax-exempt and taxable gratuity

Payment timelines depend on applicable laws or employer policy.

Important note

For employees not covered under the Payment of Gratuity Act, gratuity calculation is indicative and based on company policy and Income-tax Act provisions. Actual gratuity payable depends on employer terms.

Frequently Asked Questions

What is the minimum service period required to be eligible for gratuity?
To be eligible for gratuity under the Payment of Gratuity Act, 1972, an employee must complete at least five years of continuous service with the same employer. However, this 5-year rule is waived in the unfortunate event of an employee’s death or disablement while in service. However, as per the new Labour Laws the employee with fixed term contracts will be eligible for gratuity even after 1 year if their working days are more than 240 days.
Is gratuity calculated on basic salary?
No, gratuity is calculated on wages, not just basic salary. For gratuity, wages include basic salary, dearness allowance (DA) and retaining allowance, if any. Components like House Rent Allowance, bonuses, incentives, overtime, and most allowances are excluded. Under the new labour law wage definition, wages must be at least 50% of total remuneration, which can result in a higher gratuity compared to older salary structures.
How does "rounding off" work for my years of service?

"Rounding rules" apply specifically to employees covered under the Payment of Gratuity Act. If your service period includes a fraction of a year exceeding six months, it is rounded up to the next full year.


Example: If you served for seven years and seven months, the calculator will treat it as 8 years.


Note: For employees not covered under the Gratuity Act, rounding is usually not mandatory and depends on specific company policy.

Is gratuity taxable?
Government employees receive gratuity fully tax-free.

Private sector employees have tax exemption up to a specified limit (currently ₹20 lakh). Amounts above the exempt limit may be taxable.

The 1 Finance Gratuity Calculator helps you estimate both the exempt and taxable portions.
What components of my salary are used for the calculation?
For the purpose of gratuity, 'salary' generally refers to your last drawn Basic Salary plus Dearness Allowance (DA). Other components like HRA, bonuses, or special allowances are typically excluded from this calculation.
Does gratuity get deducted from salary?
No, it is not a monthly deduction like PF. Gratuity is a statutory benefit entirely funded by the employer. You do not contribute any portion of your monthly "in-hand" salary toward it.

Note on CTC: Many companies list gratuity as a component of your cost to company (CTC). So it could be a part of your overall CTC.
Can I receive gratuity if I am a fixed-term contract employee?
Yes. Gratuity is payable upon the completion of a fixed-term contract, provided the terms of your employment meet the legal eligibility criteria. While regular employees need to complete five years of service, specific amendments and individual contract terms may allow for gratuity payments upon the end of the contract period.
Where to check your gratuity amount?
Since gratuity is only paid at the time of exit, you won't see it in your monthly bank credits. You can check it in the following ways:

Offer letter/Joining letter: Your offer letter or annual increments will show the 'gratuity' component, usually calculated as approximately 4.81% of your Basic + DA.

Full & final Settlement: When you resign or retire, your employer provides an F&F statement that explicitly lists the total gratuity amount payable to you.

HR portal: Many companies have internal portals where you can view your accrued benefits or "Gratuity Provision" to date.
How to calculate gratuity online?
You can use the 1 Finance Gratuity Calculator to get an instant estimate. Here is the process:
1) Enter your last drawn salary (sum of your monthly Basic + DA).
2) Enter the total years you have worked (remember the 5-year eligibility rule for permanent employees).
3) Select coverage: Choose whether your company is covered under the Payment of Gratuity Act, 1972 (typically any company with 10+ employees).
4) Check how much gratuity you will get.
Can I get gratuity if I resign before 5 years?
Generally, no. According to the Payment of Gratuity Act, 1972, you must complete a minimum of five years of continuous service with the same employer to be eligible for a gratuity payout.

However, there are two important exceptions:

Death or Disablement: The five-year requirement is waived if the service is terminated due to the employee's death or permanent total disablement.

The 4 Year & 240 Days Rule: Several court rulings have established that if an employee completes 4 years and 10 months (specifically 240 days of work in the 5th year), they may be eligible for the full gratuity benefit.
At what rate is gratuity taxable?
Gratuity is not taxed at a fixed rate. It is taxed as per the individual’s income-tax slab, after allowing the applicable exemption.
Disclaimer

The results generated by this gratuity calculator are indicative and for informational purposes only. Actual gratuity payable may vary depending on employer policy, employment terms, and applicable laws, including the Payment of Gratuity Act, 1972, and Income-tax provisions (Sections 10(10)(i/ii/iii)). 1 Finance does not guarantee the accuracy of results and users should consult their employer or a qualified tax/professional advisor for exact calculations.

Frequently Asked Questions

What is the minimum service period required to be eligible for gratuity?
To be eligible for gratuity under the Payment of Gratuity Act, 1972, an employee must complete at least five years of continuous service with the same employer. However, this 5-year rule is waived in the unfortunate event of an employee’s death or disablement while in service. However, as per the new Labour Laws the employee with fixed term contracts will be eligible for gratuity even after 1 year if their working days are more than 240 days.
Is gratuity calculated on basic salary?
No, gratuity is calculated on wages, not just basic salary. For gratuity, wages include basic salary, dearness allowance (DA) and retaining allowance, if any. Components like House Rent Allowance, bonuses, incentives, overtime, and most allowances are excluded. Under the new labour law wage definition, wages must be at least 50% of total remuneration, which can result in a higher gratuity compared to older salary structures.
How does "rounding off" work for my years of service?

"Rounding rules" apply specifically to employees covered under the Payment of Gratuity Act. If your service period includes a fraction of a year exceeding six months, it is rounded up to the next full year.


Example: If you served for seven years and seven months, the calculator will treat it as 8 years.


Note: For employees not covered under the Gratuity Act, rounding is usually not mandatory and depends on specific company policy.

Is gratuity taxable?
Government employees receive gratuity fully tax-free.

Private sector employees have tax exemption up to a specified limit (currently ₹20 lakh). Amounts above the exempt limit may be taxable.

The 1 Finance Gratuity Calculator helps you estimate both the exempt and taxable portions.
What components of my salary are used for the calculation?
For the purpose of gratuity, 'salary' generally refers to your last drawn Basic Salary plus Dearness Allowance (DA). Other components like HRA, bonuses, or special allowances are typically excluded from this calculation.
Does gratuity get deducted from salary?
No, it is not a monthly deduction like PF. Gratuity is a statutory benefit entirely funded by the employer. You do not contribute any portion of your monthly "in-hand" salary toward it.

Note on CTC: Many companies list gratuity as a component of your cost to company (CTC). So it could be a part of your overall CTC.
Can I receive gratuity if I am a fixed-term contract employee?
Yes. Gratuity is payable upon the completion of a fixed-term contract, provided the terms of your employment meet the legal eligibility criteria. While regular employees need to complete five years of service, specific amendments and individual contract terms may allow for gratuity payments upon the end of the contract period.
Where to check your gratuity amount?
Since gratuity is only paid at the time of exit, you won't see it in your monthly bank credits. You can check it in the following ways:

Offer letter/Joining letter: Your offer letter or annual increments will show the 'gratuity' component, usually calculated as approximately 4.81% of your Basic + DA.

Full & final Settlement: When you resign or retire, your employer provides an F&F statement that explicitly lists the total gratuity amount payable to you.

HR portal: Many companies have internal portals where you can view your accrued benefits or "Gratuity Provision" to date.
How to calculate gratuity online?
You can use the 1 Finance Gratuity Calculator to get an instant estimate. Here is the process:
1) Enter your last drawn salary (sum of your monthly Basic + DA).
2) Enter the total years you have worked (remember the 5-year eligibility rule for permanent employees).
3) Select coverage: Choose whether your company is covered under the Payment of Gratuity Act, 1972 (typically any company with 10+ employees).
4) Check how much gratuity you will get.
Can I get gratuity if I resign before 5 years?
Generally, no. According to the Payment of Gratuity Act, 1972, you must complete a minimum of five years of continuous service with the same employer to be eligible for a gratuity payout.

However, there are two important exceptions:

Death or Disablement: The five-year requirement is waived if the service is terminated due to the employee's death or permanent total disablement.

The 4 Year & 240 Days Rule: Several court rulings have established that if an employee completes 4 years and 10 months (specifically 240 days of work in the 5th year), they may be eligible for the full gratuity benefit.
At what rate is gratuity taxable?
Gratuity is not taxed at a fixed rate. It is taxed as per the individual’s income-tax slab, after allowing the applicable exemption.

Try our other Calculators

Disclaimer

The results generated by this gratuity calculator are indicative and for informational purposes only. Actual gratuity payable may vary depending on employer policy, employment terms, and applicable laws, including the Payment of Gratuity Act, 1972, and Income-tax provisions (Sections 10(10)(i/ii/iii)). 1 Finance does not guarantee the accuracy of results and users should consult their employer or a qualified tax/professional advisor for exact calculations.