How much gratuity will you get?

For an employer covered by the gratuity law, gratuity is 15 days of pay for every year of service, where a month counts as 26 working days: last drawn basic pay plus dearness allowance, times 15, divided by 26, times years of service. Service of more than six months in the final year counts as a full year. Where the employer is not covered, the usual formula is 15 divided by 30, on completed years only.

Five years of continuous service for a permanent employee. The minimum does not apply if employment ends because of death or disablement. Since the Code on Social Security came into force on 21 November 2025, fixed-term employees qualify after one year.

For government employees, all of it. For everyone else, the tax-free amount is the lowest of the gratuity actually received, the amount worked out by the legal formula, and ₹20 lakh. The ₹20 lakh is a lifetime limit across all your employers. Check the current rules under the Income-tax Act, 2025.

Under the gratuity law, the amount an employer must pay is capped at ₹20 lakh. An employer can pay more under its own policy, but anything above the tax-free limit is taxed as salary.

If you are changing jobs, it is a lump sum that can be put towards a goal, often retirement. Clear high-interest debt first and keep an emergency fund. Then invest it in line with your plan rather than spending it because it arrived all at once.