Gratuity Calculator 2025 – Updated Labour Code, Eligibility, Formula, Tax, Online Tool

⭐ Introduction: Why the 2025 Gratuity Rules Matter

India’s labour laws underwent a major update in November 2025 when the new Labour Codes were officially enforced.
One of the most important changes impacts Gratuity eligibility, especially for Fixed-Term Employees (FTEs).

To help employees, HR professionals, and finance teams calculate accurate gratuity payouts—as per the latest rules—we built a fully updated Gratuity Calculator that reflects:

✔ New FTE eligibility: 1 completed year
✔ Standard 15/26 Payment of Gratuity formula
✔ Wage basis options (Basic, Basic+DA, Gross)
✔ Rounded quantum calculation
✔ Caps & tax-exemption rules
✔ Seasonal employee rules
✔ Company-policy override options

This article explains everything you need to know — PLUS how to use the calculator effectively.

🟠 1. Latest Labour Law Changes (Nov 2025) That Affect Gratuity

The four Labour Codes (OSHW, IR, Wages, Social Security) were finally rolled out nationwide in late 2025.

The key gratuity-related change:

📌 Fixed-Term Employees (FTEs) now become eligible for gratuity after just 1 completed year.

Earlier:

• All employees (except select cases) needed 5 years of continuous service.

Now (for FTEs):

• 1 completed year of service → eligible for gratuity.

This change increases protection for the rapidly growing gig, project-based, and contract workforce.

Other clarifications from the Labour Codes:

✔ 1. Continuous service includes:

• Paid leave

• Sick leave

• Maternity leave

• Company-declared holidays

• Lockouts/strikes (not employee fault)

✔ 2. Wages definition for social-security calculations expanded

The Wage Code emphasizes uniformity in wage definitions. Generally:
Wages = Basic + DA + Retaining Allowance
(Allowances cannot exceed 50% of total remuneration).

Our calculator allows:

• Basic only

• Basic + DA (recommended default)

• Gross monthly wages

✔ 3. Seasonal workers follow a different formula

For employees in seasonal establishments:

• Gratuity = 7 days wages per season × number of seasons worked

The tool supports this too.

✔ 4. Tax exemption clarity

The most widely accepted exemption under Income Tax Act remains:
₹20,00,000 tax-exempt ceiling
(For private-sector employees).

The calculator applies this automatically unless the user customises it.

🟠 2. Gratuity Formula in India (2025 Standard)

The legally accepted formula (for covered establishments) is:

Formula:

Gratuity = (Last Drawn Salary × 15 × Number of Completed Years) ÷ 26

Where:

• Last drawn salary = Basic (or Basic+DA)

• 15 = 15 days of wages per year

• 26 = working days in a month (statutory)

🧮 Example:

• Basic Salary: ₹18,000

• Years Worked: 4

• Gratuity = (18,000 × 15 × 4) ÷ 26 = ₹41,538.46

Our calculator uses the same logic and also applies:

• Rounding rules

• Cap limits

• Tax rules

🟠 3. How to Use the Gratuity Calculator (Step-by-Step)

Follow this simple 6-step process:

Step 1 — Select Employee Type

Choose:

• Permanent

• Fixed-Term Employee (FTE)

• Seasonal / Contract

FTEs automatically get 1-year eligibility.

Step 2 — Enter Joining & Exit Date

The tool auto-detects:

• Completed years

• Extra months/days

• Rounding (if > 6 months, quantum year increases)

Step 3 — Enter Last Drawn Salary Details

Choose your wage basis:

• Basic only

• Basic + DA (recommended)

• Gross (Basic+DA+Allowances)

The calculator adapts accordingly.

Step 4 — Confirm Statutory Rules

Default:

• Days = 15

• Denominator = 26 (covered under Act)

You may override if your organisation uses a different policy.

Step 5 — Caps & Tax

• Leave “Statutory Cap” blank unless you know your company/policy cap.

• Tax exemption ceiling auto-applies (default: ₹20,00,000).

Step 6 — Click “Calculate Gratuity”

You will instantly see:

• Eligibility

• Completed years

• Wages used

• Per-year gratuity

• Total gratuity before cap

• Final payable amount

• Tax-exempt vs taxable portion

You can also:

• Copy summary

• Download CSV

Perfect for HR audits, employee settlements & policy documentation.

So go ahead and use the below moneycontain Gratuity calculator and calculate you total gratuity amount as of now.

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🟠 4. Pro Tips to Get the Most Accurate Gratuity Estimate

✔ Use Basic + DA — not CTC

CTC has no legal relevance for gratuity.

✔ Enter correct dates

Even a single day can push rounding over 6 months → higher payout.

✔ Know if your establishment is “Gratuity Act Covered”

Most are.
Covered = denominator 26
Not covered = denominator 30

✔ Use FTE option if you’re on a fixed-term contract

You get gratuity after 1 year, not 5.

✔ Don’t forget tax implications

If your gratuity exceeds ₹20,00,000 (private sector), excess is taxable.

✔ For seasonal employees

Use the dedicated seasonal option (7 days per season).

✔ For death/disablement cases

Gratuity becomes payable regardless of completed years.
(Our tool displays a legal advisory note.)

🟠 Recent Labour Law Changes (2025 Update): Before vs After

Below is a clean, highly readable comparison table showing how gratuity rules changed under the new labour codes (effective Nov 2025).

📌 BEFORE vs AFTER — Gratuity Rules in India

🟠 Benefits of the New Labour Code Changes (2025)

✔ 1. Major boost for Fixed-Term Employees (FTEs)

Workers on 6–12 month or project-based contracts now qualify for gratuity after 1 year — improving financial security.

✔ 2. Uniform definition of “wages” reduces disputes

Companies can no longer manipulate wage components to reduce social-security benefits.

✔ 3. Predictable, standardised rules across India

The new codes consolidate and simplify decades-old fragmented labour laws.

✔ 4. Better protection for gig and contract workforce

The shift to recognising FTEs aligns with modern work patterns.

✔ 5. Encourages long-term retention

Employees are more motivated to complete at least a full year.

✔ 6. Seasonal worker clarity

Seasonal establishments now have explicitly codified treatment for gratuity calculations.

🟠 Drawbacks / Challenges of the New Labour Code Changes

❌ 1. Increased cost for employers

Companies hiring on fixed-term contracts will now incur additional gratuity liability.

❌ 2. Compliance complexity during transition

HR teams must revise payroll policies, wage structures, and settlement systems.

❌ 3. Ambiguity around wage definition implementation

The “allowances capped at 50%” rule has created confusion as many companies still operate legacy wage structures.

❌ 4. Potential restructuring of salaries

To remain compliant, some organisations may be forced to increase Basic salary — raising PF, bonus, and gratuity liabilities.

❌ 5. Lack of awareness among employees

Many FTEs and contract workers still don’t know they are now eligible for gratuity after 1 year — leading to disputes.

❌ 6. No increase (yet) in tax-exempt ceiling

Even though wages and salaries have increased over time, the ₹20 lakh exemption limit has not been revised.

🟠 5. Frequently Asked Questions 

Q1. Who is eligible for gratuity in India (2025 rules)?

Permanent employees must complete 5 years, while Fixed-Term Employees (FTEs) are eligible after 1 completed year. Exceptional cases like death & disablement don’t require minimum service.

Q2. How is gratuity calculated?

Standard formula:
Gratuity = Salary × 15 × Years / 26
Salary = Basic + DA (legally accepted definition).

Q3. What is the maximum gratuity payable?

There is no universal statutory cap post-codes, but the widely used tax-exempt limit is ₹20 lakh.

Our tool allows editing based on your company/sector.

Q4. Is gratuity taxable?

Up to ₹20 lakh is exempt for non-government employees.
Excess amount is taxable.

Q5. Are allowances included in gratuity?

No. Only Basic + DA count (unless your company uses gross salary as a policy enhancement).

Q6. What if I change jobs within the same group company?

If PF/HR records maintain continuity, gratuity tenure may continue.
Always check with HR.

Q7. Does maternity leave count as continuous service?

Yes.
Maternity leave, earned leave, sick leave all count.

Q8. What happens if an employee dies before completing 1 year?

Gratuity becomes payable immediately — with enhanced slabs under certain rules.

Our tool shows a reminder about special cases.

🟠 6. Conclusion

The new labour codes rolled out in November 2025 have made gratuity more inclusive, especially for India’s growing Fixed-Term workforce.
Our updated gratuity calculator ensures your calculations align with:

• Latest legal rules

• Correct wage basis

• Accurate completed years

• Proper rounding

• Caps & tax implications

Whether you’re an employee estimating your payout or an HR/payroll manager preparing final settlements, this tool provides fast, accurate, and legally compliant results.

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🟠 Disclaimer (Important)

This online gratuity calculator is for informational and educational purposes only.
Final gratuity payouts can vary based on:

• Company policy

• Collective agreements

• Court rulings

• Establishment category

• Exceptional cases (death/disablement)

• State-specific notifications

Always consult your HR/Finance team or legal advisor for official calculations.