Compliance Pack
Gratuity calculation and payment (Code on Social Security, earlier Payment of Gratuity Act)
What this means, checked by a CA
Gratuity is the lump sum an employer owes when you leave after enough service. We check eligibility under the new labour code, compute it with the 15/26 formula on the correct wages, tell you the tax-free part, and help the employer issue the notice and pay within 30 days.
₹999
On exit, + 18% GST
- Delivered in 2 working days after service and salary details
- Due: Employer must determine gratuity, give written notice and pay within 30 days of it becoming payable
How we do it: IDFD
Every case runs through the same four steps: Information, Discussion, Forms, Deliverables. You see each one ticked as it happens.
InformationWhat we need from you · 7 items
Appointment letter and joining date
Counts continuous service
Exit date and reason
Eligibility and 5-year waiver
Last drawn salary breakup
Wages under the 50% rule
Fixed-term contract, if anyOptional
Pro rata after one year
Gratuity nomination formOptional
Who gets paid on death
Gratuity received from past employersOptional
₹20 lakh lifetime tax cap
Company gratuity policy or trust rulesOptional
Better terms are preserved
DiscussionWhat we discuss · 6 items
Is the establishment covered for gratuity (10 or more employees at any time in the last 12 months)?
Decides 15/26 or 15/30 tax formula
Was the employee permanent or on a fixed-term contract?
5 years vs 1 year rule
How many years and months of service exactly, including any break?
Part year over six months counts
What share of pay is basic plus DA?
50% rule may raise gratuity wages
Was the exit due to death, disablement, termination for misconduct or damage?
Waiver or forfeiture
Has the employee claimed gratuity exemption before?
Reduces the tax-free balance
FormsForms we file · 6 items
Check eligibility and count completed years of service
Completed years plus one if the last part year exceeds six months
Where: Internal. Due: On exit
Compute gratuity wages and the amount
Last monthly wages (basic plus DA, with the 50% add-back) x 15 / 26 x years; pro rata for fixed-term; check the notified ceiling. Example: ₹60,000 x 15 / 26 x 23 years = ₹7,96,154
Where: Internal. Due: On exit
Employee applies to employer (Form IV under the Central Rules 2026, earlier Form I)
Where: Employer. Due: On becoming payable; employer must act even without an application
Employer gives written notice of the amount to the payee and the competent authority (Form V, earlier Form L)
Where: Employer and competent authority. Due: Within 30 days of becoming payable
Pay gratuity and compute the tax-exempt part for TDS
Exempt = least of actual gratuity, formula amount and ₹20 lakh less any exemption used earlier
Where: Employer payroll. Due: Within 30 days of becoming payable
If disputed, deposit the admitted amount with the competent authority; employee may claim (Form VI)
Where: Competent authority under the Code. Due: On dispute; appeal within 60 days of order
DeliverablesWhat you get · 4 items
Gratuity computation sheet
When: 2 working days
Tax note on exempt and taxable part
When: With computation
Draft employer notice of amount
When: With computation
Payment confirmation
When: Within 30 days of exit
Questions people ask
Has the gratuity formula changed under the new labour code?
No. It is still 15 days' wages for each completed year, with more than six months rounded up. What changed is the wage definition and the one-year rule for fixed-term staff.
Why divide by 26?
For monthly-rated employees, 15 days' wages is the monthly rate divided by 26 and multiplied by 15.
How much gratuity is tax-free?
For private employees, the least of actual gratuity, the formula amount and ₹20 lakh, as a lifetime cap. Government employees are fully exempt.
When must the employer pay?
Within 30 days of the date gratuity becomes payable, with interest if late.
Can gratuity be withheld?
Only to the extent of damage caused by a wilful act on termination, or wholly or partly for riotous conduct, violence or an offence of moral turpitude.
What if the employee dies before five years?
The five-year rule does not apply; gratuity is paid pro rata to the nominee or heirs.
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