Gratuity Calculator
Estimate your gratuity under the 2025 Labour Codes — ₹25 lakh tax-free limit, 1-year rule for contract staff, and broader wage definition.
Calculate Your Gratuity
What is Gratuity?
Gratuity is a lump-sum amount paid by an employer to an employee as a token of appreciation for long and continuous service. It is governed by the Payment of Gratuity Act, 1972 and, from 2025, by the new Code on Social Security.
Gratuity becomes payable on retirement, resignation, death, or disablement. For private sector employees, the tax-free limit was raised from ₹20 lakh to ₹25 lakh in Budget 2025, aligning it with the Central Government employee limit.
The new Labour Codes also expanded the wage definition (Basic + DA + Retaining Allowance, must be ≥ 50% of CTC) and made fixed-term contract employees eligible after just 1 year of service — a major change from the earlier 5-year requirement.
How is Gratuity Calculated?
For employees covered under the Payment of Gratuity Act:
Gratuity = (15 / 26) × Last Drawn Wage × Completed Years of Service
Where:
- 15 = 15 days of wage for each completed year
- 26 = average number of working days in a month
- Last Drawn Wage = Basic + DA + Retaining Allowance (last drawn)
- Completed Years = rounded up if final year exceeds 6 months
Example: For a ₹75,000 monthly wage and 10.5 years of service (rounded up to 11 years), gratuity = (15/26) × 75,000 × 11 = ₹4,75,961 — fully tax-free under the new ₹25 lakh limit.
Key 2025 Gratuity Rules at a Glance
| Aspect | 2025 Rule |
|---|---|
| Eligibility (Permanent) | 5 years continuous (or 4 years + 240 days) |
| Eligibility (Fixed-Term) | 1 year of service |
| Formula | (15/26) × Wage × Years |
| Wage Definition | Basic + DA + Retaining (≥50% of CTC) |
| Tax-Free Limit | ₹25,00,000 (Private Sector) |
| Payment Deadline | 30 days from due date (10% p.a. interest on delay) |
| Forfeiture | Only for moral turpitude or wilful damage |