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Tools — Code on Social Security, 2020

Gratuity
Calculator

Updated for the Code on Social Security, 2020 — effective 21 November 2025. Incorporates the new 50% wage rule, fixed-term employee eligibility, and the retrospective wage definition change. Enter your CTC and basic pay to see how the new law changes your gratuity.

Effective from
21 November 2025
Wage base
MAX (Basic + DA + Special Allowance, 50% of CTC)
FTE eligibility
1 year (was 5 years)
Statutory maximum
₹20,00,000
Payment deadline
30 days from date of claim

Before the Labour Codes vs Now

What changed on 21 November 2025
Payment of Gratuity Act, 1972
—
Wage base for calculation
Basic Pay + Dearness Allowance only. Employers kept basic pay low (20–35% of CTC) to minimise liability.
—
Eligibility for regular employees
5 years of continuous service. Death or disablement: no minimum required.
—
Fixed-term employees
Excluded unless they completed 5 continuous years — effectively impossible for most FTE roles.
—
Allowance treatment
HRA, conveyance, special allowances fully excluded from wage base. Widely exploited for tax arbitrage.
Code on Social Security, 2020
→
Wage base for calculation
MAX (Basic + DA + Special Allowance, 50% of CTC). If allowances exceed 50% of total CTC, the excess is added back to wages. The base cannot be below 50% of CTC.
→
Eligibility for regular employees
Unchanged at 5 years. Death or disablement still waives the threshold entirely.
→
Fixed-term employees
Eligible after 1 year of continuous service. Pro-rata calculation applies. Same formula (÷26) as regular employees.
→
Allowance treatment
Allowances exceeding 50% of CTC are reclassified as wages. A typical employee with 30% basic can see gratuity increase by 50–66%.
Your Details
Covered = establishments with 10+ employees · Divisor: 26
Enter your total annual CTC. The calculator converts to monthly automatically.
₹
Your current basic pay plus dearness allowance as per payslip
₹
Effective Wage Under New Labour Codes
Your Basic + DA—
50% of CTC (minimum threshold)—
Allowances exceeding 50%—
Effective wage for gratuity—
Old law wage base—
Increase in wage base—
Service Period
Months ≥ 6 round up to the next full year for calculation
Retrospective impact: new wage definition applies only if 5 years completed on or after 21 Nov 2025
Death or disablement waives the minimum service requirement entirely
Result
₹

Enter your CTC, basic pay, and service period — then click Calculate.

Gratuity Payable Under New Labour Codes
₹0
Under Old Law (Basic+DA only)
₹0
Payment of Gratuity Act, 1972
Under New Codes (50% rule applied)
₹0
Code on Social Security, 2020
Your Basic + DA —
50% of CTC (new minimum) —
Effective wage used —
Service years for calculation —
Formula —
Calculated amount —
Statutory ceiling ₹20,00,000
Final payable —
Disclaimer
This calculator provides an indicative amount under the Code on Social Security, 2020. Actual entitlement may vary based on your employment contract, applicable state rules, and final notified rules. This does not constitute legal advice. Payment must be made within 30 days of claim — interest applies on delay.

What You Need to Know

Under the Code on Social Security, 2020
01
The 50% wage rule — the biggest change
If your allowances (HRA, conveyance, special allowance etc.) exceed 50% of your total CTC, the excess is added back to your wages for gratuity calculation. An employee with 30% basic on ₹1L CTC previously had gratuity computed on ₹30,000. Now it is computed on ₹50,000 — a 66% increase.
02
Fixed-term employees — 1 year, not 5
Section 53 of the Code reduces the gratuity threshold for fixed-term employees from 5 years to 1 year. Pro-rata calculation applies on expiry of the contract. The same formula (÷26) and the ₹20L ceiling apply. Organisations with large FTE populations have an immediate provisioning obligation.
03
Retrospective impact — who does it affect?
The new wage definition applies to employees who complete 5 years of service on or after 21 November 2025. Employees who completed 5 years before that date were covered under the old Payment of Gratuity Act, 1972 for that gratuity event. Future service continues under the new regime.
04
Death or disablement — no minimum service
In case of death or permanent disablement, gratuity is payable regardless of how long the employee has worked. There is no minimum service requirement. The amount is calculated on actual completed years of service and the effective wage base under the new law.
05
Payment timeline — 30 days, strictly
Employers must settle gratuity within 30 days of the date it becomes payable. Delays beyond 30 days attract simple interest at the rate prescribed under the rules. Early processing is not just good practice — it is now a stricter legal obligation under the consolidated Code.
06
Tax treatment remains unchanged
Gratuity received by private sector employees remains exempt from income tax up to ₹20,00,000 under Section 10(10) of the Income Tax Act, 1961. The ceiling and exemption structure have not changed — only the computation base has. Government employees continue to enjoy full exemption.

The Formula, Explained

Effective wage = MAX (Basic + DA + Special Allowance, 50% of CTC)
Gratuity = (Effective Wage × 15 × Years of Service) ÷ 26
Why this changed: Under the Payment of Gratuity Act 1972, wages meant only Basic + DA — a figure employers could legally suppress to as low as 20% of CTC. The Code on Social Security 2020 plugs this by mandating that no more than 50% of CTC can be in allowances. The 15 and 26 are unchanged: 15 days of wages per year of service, divided by 26 working days in a month.

For employees not covered under the Act (fewer than 10 employees): divisor changes to 30 (calendar days), reflecting the same pro-rata logic on a monthly basis.

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