Calculate gratuity payable under the Payment of Gratuity Act using the 15/26 formula — updated for the Labour Codes effective 21 November 2025.
Built for HR teams and founders handling exits, FnF settlement, and gratuity liability planning.
Enter joining and last working dates along with last drawn salary.
Fill in service details to calculate gratuity instantly.
Many Indian tech companies structure CTC with a low basic pay and large allowances to reduce PF and gratuity liability. Under the Labour Codes effective 21 November 2025, "wages" used for statutory dues cannot fall below 50% of total remuneration — so gratuity liability on allowance-heavy salary structures is now higher than the old basic-only calculation suggested. Run payroll through Clan's payroll plans to keep PF, ESI, TDS, and gratuity provisioning aligned automatically.
Gratuity = (last drawn basic + DA) × 15 × completed years of service ÷ 26. A remainder of 6 months or more in the final year is conventionally rounded up to a full year; less than 6 months is dropped.
Not anymore, if they joined on or after 21 November 2025 — the date India's four Labour Codes came into force. Fixed-term employees who join from that date become eligible for gratuity after 1 year of continuous service (240+ days worked), instead of the usual 5 years that still applies to permanent employees.
Under the "wages" definition carried across the new Labour Codes, allowances excluded from wages cannot bring the wage figure below 50% of total remuneration. If your basic + DA is less than half of gross salary, the calculator also shows gratuity computed on that higher wage floor, which is the figure statutory audits are now more likely to expect.
For private-sector employees, gratuity received is exempt from income tax up to a lifetime cumulative limit of ₹20 lakh under Section 10(10), across all employers over your career — not per employer. Amounts above ₹20 lakh are taxable as salary income. Government employees have no upper limit on the exemption.
No. The Payment of Gratuity Act caps the statutory obligation at ₹20 lakh. Many employers voluntarily pay any formula amount above that as an ex-gratia payment, which is then fully taxable rather than exempt.
This tool computes a single statutory payout — gratuity. For accrued leave and encashment value at exit, use the leave balance calculator. For a broader checklist covering PF, ESI, professional tax, and gratuity obligations together, use the compliance checker.
