Gratuity & Full and Final Settlement Calculator India (2026)
Resigning, retiring or being laid off? Estimate your full and final settlement — gratuity, notice pay, leave encashment, retrenchment compensation and EPF — plus the tax under the new regime.
How full and final settlement works in India
Quick answer
- Gratuity: 15/26 × last monthly wages × years of service. Permanent staff need 5 years of continuous service, and fixed-term employees qualify after 1 year. Capped at ₹20 lakh.
- Wages for gratuity: basic + DA. Under the Labour Codes, allowances above 50% of your total pay are added back, so wages are effectively at least 50% of gross.
- Retrenchment (workers): 1 month's notice or pay instead, 15 days' average pay per year of service, plus 15 days' wages from the Worker Re-skilling Fund.
- Deadline: final wages within 2 working days of your last day, and gratuity within 30 days.
- Tax‑free: gratuity up to ₹20 lakh (lifetime), leave encashment up to ₹25 lakh and retrenchment compensation up to ₹5 lakh.
India's four Labour Codes, the Code on Wages, the Code on Social Security, the Industrial Relations Code and the OSH Code, came into force on 21 November 2025. They replaced the Payment of Gratuity Act, the Industrial Disputes Act and other older laws. States are still notifying their own rules, so some details vary by state.
What's in a full and final settlement
| Component | Rule |
|---|---|
| Gratuity | 15 days' wages per completed year (a final part-year over 6 months counts), ÷ 26 working days; max ₹20 lakh |
| Notice pay | One month for workers, or as per your appointment letter (commonly 30–90 days) |
| Retrenchment compensation | 15 days' average pay per completed year, for workers with 1+ year of service |
| Re-skilling Fund | 15 days' last-drawn wages, credited within 45 days of retrenchment |
| Leave encashment | Unused earned leave paid out on leaving (1 day accrues per 20 days worked; up to 30 days can be carried forward) |
| Salary, bonus & dues | Pro-rata salary to your last day, plus any bonus, incentives and reimbursements owed |
| EPF | Your provident fund, withdrawn or transferred through EPFO. Tax-free after 5 years of continuous service |
India gratuity & final settlement FAQs
How is gratuity calculated in India?
Gratuity = 15 × last drawn monthly wages × years of service ÷ 26. Wages means basic pay plus dearness allowance, with the Labour Codes' 50% rule applied. For example, ₹60,000 basic + DA and 7 years 8 months of service gives 15 × 60,000 × 8 ÷ 26 = ₹2,76,923, because the final part-year over 6 months counts as a full year.
What changed in gratuity under the new Labour Codes?
Since 21 November 2025, fixed-term employees qualify for gratuity after 1 year of service instead of 5, on a pro-rata basis. "Wages" now has a uniform definition: if allowances are more than 50% of your total pay, the excess counts as wages, which raises gratuity for many people with a low basic salary.
Do I get gratuity if I resign before 5 years?
Generally no, if you're a permanent employee. You need 5 years of continuous service. Several High Courts have held that 4 years and 240 days counts as 5 years. Fixed-term employees qualify after 1 year, and the 5-year rule doesn't apply on death or disablement.
Is gratuity taxable?
For private-sector employees, gratuity is tax-free up to ₹20 lakh over your whole working life, reduced by any exemption you've claimed at earlier jobs. Amounts above that are taxed as salary. Government employees' gratuity is fully exempt.
How long can my employer take to pay my full and final settlement?
Under the Code on Wages, final wages must be paid within 2 working days of your last working day, whether you resign, retire or are terminated. Gratuity must be paid within 30 days of becoming due, and interest is payable if it's late.
How is leave encashment calculated and taxed?
Unused earned leave is usually paid at one day's wages per day: monthly wages ÷ 26, or gross ÷ 30 under some company policies. When you leave a job, leave encashment is tax-free up to the lowest of ₹25 lakh, 10 months' average salary and the actual amount, with leave counted at up to 30 days per year of service.
What do I get if I'm retrenched?
Workers with at least 1 year of continuous service get one month's notice (or pay instead), retrenchment compensation of 15 days' average pay per year of service, and 15 days' wages from the Worker Re-skilling Fund within 45 days. Retrenchment compensation is tax-free up to ₹5 lakh.
Can my employer deduct notice pay from my settlement?
If you resign without serving the notice period in your appointment letter, many employers recover the shortfall from your final settlement unless they agree to waive it. Ask for a written release date if you're leaving early.
Reviewed against the Code on Social Security 2020, Code on Wages 2019, Industrial Relations Code 2020, OSH Code 2020 (in force 21 Nov 2025) and the Income-tax Act 2025 (FY 2026-27). Sources: Ministry of Labour & Employment · Income Tax Department · EPFO
Job market & economy in India
India's unemployment rate was an estimated 4.2% in 2025 (World Bank / ILO). Consumer prices rose 2.4% in 2025 (World Bank). Inflation erodes the real value of your gratuity and final settlement over time, so it pays to plan how you invest or spend it.
- 1 USD₹ 95.32
- 1 GBP₹ 126.3
- 1 EUR₹ 106.7
- 1 AED₹ 25.95
Show data table
| Year | Unemployment |
|---|---|
| 2025 | 4.2% |
| 2024 | 4.2% |
| 2023 | 4.2% |
| 2022 | 4.8% |
| 2021 | 6.4% |
| 2020 | 7.9% |
| 2019 | 6.5% |
| 2018 | 7.7% |
| 2017 | 7.6% |
| 2016 | 7.6% |
Show data table
| Year | Inflation |
|---|---|
| 2025 | 2.4% |
| 2024 | 5.0% |
| 2023 | 5.6% |
| 2022 | 6.7% |
| 2021 | 5.1% |
| 2020 | 6.6% |
| 2019 | 3.7% |
| 2018 | 3.9% |
| 2017 | 3.3% |
| 2016 | 4.9% |
Sources: OECD (monthly unemployment) · World Bank (annual unemployment & inflation) · ExchangeRate-API (exchange rates, refreshed live). Statistics last updated 14 October 2026.