Gratuity

Gratuity is governed by the Code on Social Security, 2020 for covered cases under the current central framework. Relevant provisions took effect from 21 November 2025. It is linked to an employee's qualifying termination event, last-drawn eligible wages, and continuous service rather than being an automatic percentage of gross salary.

The statutory wage definition includes basic pay, dearness allowance, and retaining allowance, if any, and specifies exclusions plus a 50% add-back rule. The correct figure may therefore require payroll review; gross salary or CTC should not be substituted without checking the definition.

For the standard amount, every completed service year is counted and a remaining part-year is added only when it is in excess of six months. Exactly six additional months does not add a counted year, while seven additional months does.

For a regular monthly rated employee, fifteen days' wages are calculated by dividing last-drawn eligible monthly wages by 26 and multiplying by 15. That amount is multiplied by counted service years, then the statutory ceiling is applied.

The currently confirmed statutory ceiling is ₹20,00,000. For example, ₹50,000 of eligible monthly wages and 7 years 7 months gives 8 counted years and a formula amount of about ₹2,30,769.23, below the ceiling.

This definition was reviewed on 13 July 2026 against the Code on Social Security, 2020, commencement notification S.O. 5319(E), the Social Security (Central) Rules, 2026, Ministry Labour Codes FAQs dated 30 December 2025, Additional FAQs as on 16 March 2026, and S.O. 1420(E). The 2018 ceiling notification was issued under the repealed 1972 Act; the Code's savings clause continues non-conflicting prior notifications, and the December 2025 FAQs confirm ₹20 lakh as the current maximum. The calculator page provides the source links.