Is gratuity paid after 4 years and 7 months?

Not on resigning or retiring, on the plain words of the Code: it asks for five years’ continuous service. The seven months would count as a year in the formula once you are eligible. Some courts have counted 240 days worked in the fifth year as completing it, so if this is your case, ask a labour lawyer.

Do fixed-term employees get gratuity after one year?

Yes. A fixed-term employee is eligible after one year under the contract, with no five-year wait. Under the Central Rules, a part year over six months after that counts as one more year.

Has the labour code changed my gratuity?

Possibly. From 21 November 2025, gratuity is worked out on the codes’ wages: basic + DA plus any allowances over half of all pay. If your basic is a small part of your salary, your gratuity rises, for all your years of service, at the wages last drawn.

What is the maximum gratuity?

₹20 lakh, the ceiling the Central Government has notified. An employer may pay more under a contract or agreement.

For a private-sector employee, up to ₹20 lakh can be tax-free under section 19 of the Income-tax Act, 2025. Which entry applies to gratuity under the new Code isn’t settled, and one of them can tax part of it, so the calculator shows both. Government employees’ gratuity is fully tax-free.

When must the employer pay it?

Within 30 days of it becoming payable. After that, the employer owes simple interest from the date it was due.

Is what I type saved or sent anywhere?

No. The figures are worked out in your browser. Nothing is sent, stored or tracked by the calculator.

Can PrimoERP work this out for all my staff?

PrimoERP’s payroll keeps each employee’s salary structure (basic, DA, HRA and allowances) and posts payroll to your books every month. Ask us in a demo how it handles gratuity for your team.

Gratuity Calculator India: Formula and Rules

Gratuity calculator

Last monthly basic + DA (₹)

Basic pay and dearness allowance, as last drawn.

Other pay a month (₹), optional

HRA and other allowances, and the employer’s PF share. If they are over half of all pay, the excess counts as wages.

Length of service

Years

Months

How the job ended

Five years’ service is needed only in the first case.

Employer

Covered: 10 or more employees, or any factory, mine, oilfield, plantation, port or railway company.

Your gratuity

₹2,40,000

Service: 7 years, 8 months
Wages a month: ₹52,000
15 days’ wages÷ 26 × 15: ₹30,000
Years counted: 8
Tax-free, if Sl. 5 applies: ₹2,40,000
Tax-free, if Sl. 6 applies: ₹1,82,000

Which income-tax entry applies is not settled now the 1972 Act is repealed. Ask your CA. Government employees’ gratuity is fully tax-free. An estimate under section 53, not tax or legal advice. Nothing you type leaves this page.

How it’s worked out.

The rules the calculator applies, in order, from the Code on Social Security, its Central Rules, the Ministry of Labour’s FAQs and the Income-tax Act, 2025.

The gratuity chapter applies to every factory, mine, oilfield, plantation, port and railway company, and to every shop or establishment with 10 or more employees on any day of the last 12 months.
Source: Code on Social Security, 2020, First Schedule, Chapter V (India Code), checked 17 Oct 2026
Gratuity is payable when employment ends after at least five years’ continuous service: on superannuation, retirement, resignation, death or disablement, or the end of a fixed-term contract.
Source: Code on Social Security, 2020, s.53(1) (India Code), checked 17 Oct 2026
Five years are not needed when employment ends by death, disablement or the end of a fixed-term contract.
Source: Code on Social Security, 2020, s.53(1), second proviso (India Code), checked 17 Oct 2026
A fixed-term employee is eligible for gratuity after one year of service under the contract.
Source: Industrial Relations Code, 2020, s.2(o), proviso (c) (Gazette), checked 17 Oct 2026
For every completed year of service, or part of a year over six months, the employer pays 15 days’ wages at the rate last drawn.
Source: Code on Social Security, 2020, s.53(2) (India Code), checked 17 Oct 2026
For a monthly-rated employee, 15 days’ wages are the monthly wages last drawn ÷ 26 × 15.
Source: Code on Social Security, 2020, s.53, Explanation 3 (India Code), checked 17 Oct 2026
For a fixed-term employee, service after the first year that is over six months but under a year is rounded up to one more year.
Source: Social Security (Central) Rules, 2026, r.33(1)(a), second proviso, checked 17 Oct 2026
Wages for gratuity follow the labour codes’ definition from 21 November 2025, and all service is paid at the wages last drawn.
Source: Ministry of Labour, Additional FAQs, 16 Mar 2026, Q6 and Q17, checked 17 Oct 2026
The most gratuity payable is the amount the Central Government notifies, currently ₹20 lakh.
Source: Ministry of Labour, FAQs on Labour Codes, 30 Dec 2025, Q12, checked 17 Oct 2026
The employer must pay within 30 days of gratuity becoming payable, or pay simple interest from that date.
Source: Code on Social Security, 2020, s.56(3) and (4) (India Code), checked 17 Oct 2026
Gratuity under the Payment of Gratuity Act, 1972 is deductible from salary income up to that Act’s formula and ceiling.
Source: Income-tax Act, 2025, s.19(1), Table, Sl. No. 5 (Gazette), checked 17 Oct 2026
Any other gratuity is deductible up to the least of: the amount, the notified limit less any gratuity exempted before, and half a month’s average salary (basic + DA, last 10 months) for each completed year.
Source: Income-tax Act, 2025, s.19(1), Table, Sl. No. 6, with s.19(2)(a) and (b) (Gazette), checked 17 Oct 2026
The notified income-tax limit for gratuity is ₹20 lakh, for anyone retiring, dying or leaving on or after 29 March 2018.
Source: CBDT notification S.O. 1213(E), 8 March 2019 (Gazette), checked 17 Oct 2026

Where the law is unclear

Four years and some months. The Code asks for five years’ continuous service, and section 54 counts a year as continuous if you worked 240 days in it. Some High Courts read the same words in the old Act so that 240 days in the fifth year complete five years; others did not. The calculator asks for five completed years. Ask a labour lawyer about your case.
“Pro rata” for fixed-term and deceased employees. Section 53(2) says their gratuity is paid “on pro rata basis”. The Central Rules then round a fixed-term employee’s part year over six months up to a year, as for everyone else. The calculator counts years that way for every case; a strict pro-rata reading would pay the exact share instead (2 years 3 months as 2.25 years).
One year for fixed-term staff. The one-year rule is in the Industrial Relations Code and the Ministry’s FAQs (“one year, from start of contract”), not in the Code on Social Security’s own definition. No official text we read limits it to contracts that began on or after 21 November 2025.
Which tax entry applies. Sl. No. 5 of the Income-tax Act, 2025 still names the Payment of Gratuity Act, 1972, which the Code repealed on 21 November 2025. If it applies to gratuity under the Code, the whole gratuity up to ₹20 lakh is tax-free. If Sl. No. 6 applies, the half-month limit can make part of it taxable. The calculator shows both. Ask your CA.
Central and state rules. The Central Rules apply where the Central Government is the appropriate government; elsewhere, your state’s rules under the Code do (Ministry FAQ, March 2026, Q27).

One example, step by step.

Last basic + DA ₹52,000 a month, 7 years and 8 months of service, resigned, covered employer, no allowances over the 50% line.

Last basic + DA: 52,000
15 days’ wages52,000 ÷ 26 × 15: 30,000
Service: 7 y 8 m
Years counted8 months is over six: 8
Gratuity, ₹: 2,40,000

8 × ₹30,000 = ₹2,40,000, well under the ₹20 lakh ceiling.

An illustration, not tax or legal advice. If Sl. No. 5 of the Income-tax Act applies, all ₹2,40,000 is tax-free. If Sl. No. 6 applies, ₹1,82,000 is (half of ₹52,000 for each of 7 completed years) and ₹58,000 is taxed as salary.

What it does not cover.

Check these with your employer, your CA or a labour lawyer before you rely on the figure.

Government employees
Gratuity under government service rules follows those rules, not this chapter. It is fully tax-free.
Death-cum-retirement gratuity of Central and State Government employees (and local authorities) is deductible in full.
Source: Income-tax Act, 2025, s.19(1), Table, Sl. No. 3, with s.19(2)(g) (Gazette), checked 17 Oct 2026
Seasonal establishments
Someone not employed all year in a seasonal establishment gets 7 days’ wages a season. The calculator works in years.
In a seasonal establishment, an employee not employed throughout the year gets seven days’ wages for each season.
Source: Code on Social Security, 2020, s.53(2), second proviso (India Code), checked 17 Oct 2026
Piece-rated employees
Their daily wage is an average, not the monthly ÷ 26. Enter a monthly figure worked out from it, or ask your employer.
For a piece-rated employee, daily wages are the average of the last three months’ wages, overtime left out.
Source: Code on Social Security, 2020, s.53(2), first proviso (India Code), checked 17 Oct 2026
Working journalists
They qualify after three years, not five. Enter their service as usual and read the result with that in mind.
For working journalists, the five years are read as three.
Source: Code on Social Security, 2020, s.53(1), first proviso (India Code), checked 17 Oct 2026
Breaks in service
Leave, sickness, lay-off and strikes don’t break continuous service, but an absence the employer has formally treated as a break does. Take any such break off the dates.
Service interrupted by sickness, accident, leave, lay-off, strike or lock-out still counts as continuous.
Source: Code on Social Security, 2020, s.54(A) (India Code), checked 17 Oct 2026
Forfeiture
Gratuity can be cut for damage to the employer’s property, or forfeited for violence or an offence of moral turpitude at work.
Gratuity may be forfeited to the extent of damage caused, or wholly or partly for riotous conduct, violence or an offence involving moral turpitude.
Source: Code on Social Security, 2020, s.53(6) (India Code), checked 17 Oct 2026
Better terms by contract
An award, agreement or contract may pay more than the Code. The calculator shows the Code’s figure only.
Nothing in section 53 affects an employee’s right to better gratuity terms under an award, agreement or contract.
Source: Code on Social Security, 2020, s.53(5) (India Code), checked 17 Oct 2026
The ceiling’s history
The ₹20 lakh ceiling was set under the old Act and carries on under the Code until a new figure is notified.
The gratuity payable under the Payment of Gratuity Act, 1972 may not exceed twenty lakh rupees (from 29 March 2018).
Source: Ministry of Labour, S.O. 1420(E), 29 March 2018 (Gazette), checked 17 Oct 2026

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Gratuity questions people ask.

1.

How is gratuity calculated in India?

Last monthly wages (basic + DA) ÷ 26 × 15, times the years of service. A part year over six months counts as a full year. The total is capped at ₹20 lakh. Under the labour codes, if allowances are more than half of all pay, the excess is added to the wages first.

— the PrimoERP team

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Gratuity calculator for India.

Gratuity calculator

Your gratuity

How it’s worked out.

One example, step by step.

What it does not cover.

Government employees

Seasonal establishments

Piece-rated employees

Working journalists

Breaks in service

Forfeiture

Better terms by contract

The ceiling’s history