Gratuity
A lump sum your employer pays when your job ends after enough years of service: 15/26 of your last monthly wage per year.
Gratuity is part of your CTC that you only see when you leave: 15/26 of your last monthly wage for each year of service. If you are leaving, also read the PF withdrawal rules.
Questions people ask
What is gratuity?
A payment your employer owes you when your job ends after at least 5 years of continuous service, or 1 year for fixed-term employees, under the Code on Social Security, 2020. The 5 years are not needed on death or disablement.
How is gratuity calculated?
Last monthly wage (basic pay plus dearness allowance) ÷ 26 × 15 × years of service, counting any part year over six months as a full year.
Is there a maximum gratuity?
The Labour Ministry's FAQ on the Labour Codes puts the cap at 20 lakh rupees, though an employer can pay more by agreement. For most private-sector staff, the tax-free limit last notified was also 20 lakh rupees over a lifetime.
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