Free tool · Labour codes 2025
Gratuitycalculator.
How much gratuity is due when an employee leaves, under the 15/26 formula, the labour-code wage rule and the ₹20 lakh limit, and how much of it is tax-free.
Service and pay
Gratuity due
₹1,84,615
How it is worked out
Wages used₹40,000
Years counted (over 6 months rounds up)8
15/26 × ₹40,000 × 8₹1,84,615
Tax (non-government employee)
Tax-free · section 19 (was 10(10))₹1,84,615
Taxable as salary₹0
Gratuity due₹1,84,615
An estimate for planning, not legal or tax advice. For the not-covered formula, enter the average wages of the last 10 months.
Gratuity, in plain words
What is the formula?
15 days' wages for every year of service: last month's basic + DA × 15 ÷ 26 × years. A part-year of more than six months counts as a full year. If the employer is not covered by the Act, it is half a month's average pay (÷ 30) for each completed year.
When is gratuity due?
After five years of continuous service when an employee resigns or retires. A fixed-term employee gets it after one year, and on death or disablement there is no minimum.
Is there a limit?
Gratuity is capped at ₹20 lakh, which is also the most a non-government employee receives tax-free. An employer may pay more, but the excess is taxable.
What changed with the labour codes?
From 21 November 2025, 'wages' must be at least half of total pay. If allowances are more than 50%, the excess is added back, which raises gratuity for many people.
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