Gratuity Formula India 2026 — The 15/26 Rule Explained
Gratuity = (Basic + DA) × 15 × Years of Service ÷ 26. If no DA, use Basic Salary only. The fractions "15" and "26" represent 15 days of pay per year, divided by 26 average working days/month. New 2025 rules now require a minimum 50% of CTC as the calculation base.This page directly answers exact queries like 15/26 in gratuity, what is 15/26 in gratuity calculation, gratuity formula 4.81, and gratuity is 4.81 of basic.
The Statutory Gratuity Formula
Covered Under Gratuity Act (10+ employees)
Gratuity = (Basic + DA) × 15 × Years ÷ 26
NOT Covered by Act (fewer than 10 employees)
Gratuity = (Basic + DA) × 15 × Years ÷ 30
Exact-Match Answer
If you are asking what is 15/26 in gratuity calculation, the short answer is this: your monthly wage is converted into a daily wage by dividing by 26, and then 15 days of that wage is awarded for each completed year of service.
What Does 15/26 Actually Mean?
The fraction 15/26 is fundamental to understanding Indian gratuity:
Days Earned Per Year
For every year of service, you "earn" 15 days' worth of salary as gratuity. This is the reward component — roughly half a month's basic pay per year.
Working Days Per Month
30 calendar days minus ~4 Sundays = 26 working days. Dividing by 26 converts your monthly salary to a daily rate. This divisor is mandated by the Act for covered employers.
Gratuity Percentage — What It Means for Your Salary
Employers often express gratuity as a percentage of salary for CTC planning. Here's the math: 15 ÷ 26 ÷ 12 = 4.81%
This means 4.81% of your annual Basic + DA is the gratuity accrual per year of service. Most employers provision this in your CTC calculation, though it doesn't reduce your take-home salary — gratuity is funded entirely by the employer.
| Monthly Basic (No DA) | 10 Years Service | 20 Years Service | Annual Accrual (~4.81%) |
|---|---|---|---|
| ₹30,000 | ₹1,73,077 | ₹3,46,154 | ₹17,308 |
| ₹50,000 | ₹2,88,462 | ₹5,76,923 | ₹28,846 |
| ₹75,000 | ₹4,32,692 | ₹8,65,385 | ₹43,269 |
| ₹1,00,000 | ₹5,76,923 | ₹11,53,846 | ₹57,692 |
| ₹1,50,000 | ₹8,65,385 | ₹17,30,769 | ₹86,538 |
What Does 4.81 of Basic Mean in Gratuity?
When HR teams say gratuity is 4.81% of basic salary, they are converting the same 15/26 rule into an annual accrual rate. The math is simple: 15 / 26 / 12 = 4.81%.
Example
If your monthly basic salary is Rs. 50,000, your employer will typically provision about Rs. 28,846 per year toward gratuity liability. That does not mean the amount is deducted from your salary. It is simply the employer's accounting provision for a future payout.
Worked Examples
Example 1: IT Employee Without DA
Neha works at a Hyderabad software company for 10 years. Basic salary: ₹80,000/month. No DA. Employer has 50+ employees (covered under Act).
Example 2: Manufacturing Employee With DA
Ramesh works at a Chennai factory for 15 years. Basic: ₹45,000, DA: ₹10,000/month. Employer covered under Act.
New 2025 Rule: 50% CTC Wage Floor
Under the Social Security Code 2020 (effective November 2025), if your Basic + DA is less than 50% of your total CTC, your gratuity calculation base is automatically raised to 50% of CTC. This prevents employers from artificially lowering the basic salary to reduce statutory gratuity liability.
Use the Gratuity Calculator
Used only to verify the 50% wage floor rule under the new Labour Code.
Wages will be at least 50% of monthly CTC
Enter your CTC/Salary and service period to calculate
Frequently Asked Questions
What is the gratuity formula in India?
The statutory gratuity formula under the Payment of Gratuity Act 1972 is: Gratuity = (Basic Salary + DA) × 15 × Years of Service ÷ 26. Here, 15 represents 15 days of wages earned per year of service, and 26 is the average number of working days per month (a month has ~26 working days when Sundays are excluded).
What is 15/26 in gratuity calculation?
The fraction 15/26 is the core of the Indian gratuity formula. "15" means you earn 15 days' worth of salary for each year of service as gratuity. "26" represents 26 working days in a month (Sundays excluded). So 15/26 = approximately 0.577, meaning your monthly gratuity accrual is about 57.7% of your monthly salary divided by 12. Example: If your basic salary is ₹50,000/month and you served 10 years, gratuity = 50,000 × 15 × 10 ÷ 26 = ₹2,88,462.
Why is 26 used as divisor instead of 30 in the gratuity formula?
The number 26 is used because it represents the average number of working days in a calendar month when Sundays (weekly rest) are excluded. 26 = 30 days per month minus approximately 4.3 Sundays per month. Employers covered under the Payment of Gratuity Act 1972 (10+ employees) use 26. Employers NOT covered by the Act may use 30 (calendar days), which gives a slightly lower payout.
How is gratuity calculated for employees without DA?
Most private sector employees (IT, e-commerce, startups, consulting) do not receive Dearness Allowance. Simply use Basic Salary alone: Gratuity = Basic Salary × 15 × Years of Service ÷ 26. The formula structure is identical — DA is just treated as zero. Example: Basic ₹60,000, 8 years service: ₹60,000 × 15 × 8 ÷ 26 = ₹2,76,923.
What is the gratuity percentage in India?
Gratuity accrues at a rate of 15/26 × 1/12 per month of service — approximately 4.81% of monthly basic salary. Employers often provision for this in CTC by setting aside ~4.81% of Basic + DA annually. For easy calculation: annual gratuity accrual ≈ (Basic + DA) × 4.81% per year.
What is the new gratuity calculation rule under the 2025 Labour Code?
The Social Security Code 2020 (effective November 2025) introduces the 50% CTC rule: the "wages" used for gratuity calculation must be at least 50% of your total CTC. If your Basic + DA is below 50% of CTC, the calculation base is automatically raised to 50% of CTC. This protects employees whose employers structured salary with low basic pay to reduce statutory contributions.
What is the maximum gratuity formula limit?
The Payment of Gratuity Act caps the tax-free gratuity at ₹20 lakh (for private sector employees). If the formula produces a number exceeding ₹20 lakh, only ₹20 lakh is tax-free; the rest is taxable at your income slab rate. Government employees have a higher ceiling of ₹25 lakh.