What is a Gratuity Calculator?
For gratuity becoming payable under the current labour-code framework, the Code on Social Security, 2020 applies from 21 November 2025. For a monthly-rated employee, section 53 uses fifteen days' wages for each countable year of service, with fifteen days calculated as monthly wages ÷ 26 × 15.
The wage input is not automatically the payslip label “Basic + DA”. The Labour Ministry's 2026 FAQs confirm that the labour-code definition of wages applies and that the 50% allowance rule can add excess excluded remuneration back into statutory wages. This calculator therefore asks for the eligible monthly wage base after applying the current definition.
How gratuity is calculated for monthly-rated employees
For a regular employee in the standard resignation/retirement case, five years of continuous service is required and a part-year counts only when it is in excess of six months. For a fixed-term employee, Labour Ministry guidance confirms eligibility after one year under the contract and section 53 provides pro-rata treatment. Death, disablement, piece-rated work and seasonal employment have special rules that this simplified calculator does not model.
Choose the employment category, enter the statutory monthly wage base, then enter completed years and additional months. If you only know your payslip components, determine the legal wage base first rather than assuming Basic + DA is always sufficient.
Why the wage definition matters after 21 November 2025
The Labour Ministry's FAQ explains the 50% rule: if excluded allowances and benefits that are subject to the rule exceed 50% of remuneration, the excess is added back to wages for statutory calculations. Its illustration uses total remuneration of ₹76,000, Basic + DA of ₹20,000 and an excess allowance amount of ₹2,000, producing statutory wages of ₹22,000. The exact components included in the test depend on the statutory definition; use the legally determined wage base for a consequential claim.
Regular and fixed-term service are not the same
For regular employees, section 53(2) counts every completed year plus a part-year only when it is in excess of six months; exactly six months is not “in excess of” six months. The standard five-year eligibility condition still applies to ordinary resignation or retirement, subject to statutory exceptions such as death or disablement.
For a directly employed fixed-term employee, the Labour Ministry's March 2026 FAQ confirms eligibility after one year under the contract, and section 53 provides pro-rata gratuity. This calculator uses completed months to estimate that pro-rata service.
Ceiling and tax treatment are separate
Section 53(3) caps gratuity at the amount notified by the Central Government. The ₹20 lakh central ceiling notified under the earlier law continues to be the operative reference through the Code's repeal-and-savings framework unless superseded by a later notification. Income-tax exemption is a separate question and can depend on employee category and the tax law applicable when payment is received; do not use a tax exemption limit as the gratuity formula.
Primary references
See Code on Social Security, 2020 — section 53, the Labour Ministry's Additional FAQs on Labour Codes (16 March 2026), and its wage-definition FAQs.
Frequently asked questions
Is gratuity in 2026 still governed only by the Payment of Gratuity Act, 1972?
No. The Code on Social Security, 2020 came into force for the relevant gratuity provisions from 21 November 2025. Current calculations should be described under that framework.
What salary should I enter?
Enter the eligible monthly wages under the statutory wage definition. Do not automatically use full CTC or assume Basic + DA is always the final legal wage base.
Does exactly six extra months round up for a regular employee?
Section 53(2) says a part-year counts when it is in excess of six months. Exactly six months therefore does not round up under the statutory wording.
When is a fixed-term employee eligible?
The Labour Ministry's March 2026 FAQ says a fixed-term employee is eligible after rendering service under the contract for one year. The Code provides pro-rata gratuity for fixed-term employment.
Does a regular employee still need five years?
For the standard resignation/retirement case, yes. The Code separately removes the five-year condition for death, disablement, expiration of fixed-term employment and other notified events.
Is the ₹20 lakh ceiling the same as the income-tax exemption?
No. The employment-law ceiling and the income-tax exemption are separate legal questions. This calculator caps the statutory estimate at the current central ₹20 lakh ceiling but does not calculate the tax exemption.
Does this calculator cover seasonal or piece-rated employees?
No. Section 53 contains different wage mechanics for piece-rated and seasonal employees. This calculator is intentionally limited to monthly-rated regular and fixed-term employees.