Employee benefits
How is gratuity calculated?
Gratuity is 15 days’ wages for every completed year of service, with any part-year over six months counted as a full year. In practice: divide your last drawn monthly wages by 26, multiply by 15, then multiply by your years of service. Since 21 November 2025, "wages" means the higher of your basic pay plus DA, or half your total monthly pay. Gratuity is capped at ₹20 lakh.
In short
- Formula: monthly wages ÷ 26 × 15 × completed years.
- A part-year over six months counts as a full year.
- Wages = the higher of basic plus DA, or half your total pay.
- Gratuity is capped at ₹20 lakh.
What is the gratuity formula?
Gratuity = last drawn monthly wages ÷ 26 × 15 × completed years of service. The law gives 15 days’ wages for every completed year. A month is treated as 26 working days, which is where the 26 comes from.
What does 15/26 mean in gratuity?
15 days’ wages out of a 26-day working month. Dividing monthly wages by 26 gives one day’s wage; multiplying by 15 gives the gratuity for one year of service.
What counts as wages for gratuity now?
Since 21 November 2025, gratuity is worked out on "wages" as defined in the Code on Social Security, 2020. That includes basic pay, dearness allowance and retaining allowance. If the excluded parts of your pay, such as most allowances, add up to more than half your total remuneration, the excess is added back. In one line: the wage base is the higher of your actual basic plus DA, or half your total monthly pay. Where basic was kept low, gratuity rises. Our page on gratuity under the new Labour Codes explains the change.
How are years of service counted?
Completed years, with any part-year over six months rounded up. Six years and seven months counts as seven years; six years and five months counts as six.
Frequently asked questions
How is gratuity calculated in India?
Last drawn monthly wages ÷ 26 × 15 × completed years of service, with part-years over six months counted as a full year, capped at ₹20 lakh.
What is 15/26 in gratuity?
15 days' wages for every year of service, out of a 26-day working month.
Is gratuity calculated on basic or gross salary?
On wages as defined by the Code on Social Security: the higher of basic plus DA, or half of total monthly pay.
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A note on this page. Everything here is general information, not legal or tax advice, and nothing is an offer. Gratuity rules are as understood at the review date under the Code on Social Security, 2020, in force from 21 November 2025, and state positions can differ. For advice about your situation, talk to us.