The many benefits of those working in India, especially those on a fixed term, are immense because of the New Gratuity Rule 2026. These include reorganization arising out of the complete implementation of the Social Security Code, and the explicit push to expedite circulation and access to gratuity for all. Directly linked to you (whether you work under a consistent or contracting mechanism) are the results of such changes for your retirement benefits.
Key Change for Fixed-Term Workers
The amendment resulting in huge uplifting for fixed-term employees is that, unlike in the past, even after just one year of continuous service they can qualify in receiving gratuity. They have to wait for five years, just like their permanent counterparts, to walk back to work under the calculation. This pro-rated system will permit more than those millions to receive gratuity at the culmination of their agreement in project-based, gig, or seasonal jobs.
Updated Wage Calculation Method
The new section provides that from April 2026, the wages used for reckoning gratuity should be 50% of the total remuneration (CTC). If the basic pay plus dearness allowance is less than 50%, the amount payable shall be enhanced accordingly. This usually enhances the gratuity amount at the time of payment for employees with high allowances or incentives.
Comparison of Old vs New Gratuity Rules
| Aspect | Old Rule (Before 2026) | New Rule (2026 Onward) |
|---|---|---|
| Eligibility – Permanent | 5 years continuous service | 5 years continuous service |
| Eligibility – Fixed-Term | 5 years continuous service | 1 year continuous service |
| Wage Base for Calculation | Basic + Dearness Allowance | Minimum 50% of total CTC |
| Maximum Tax-Free Limit | ₹20 lakh | ₹20 lakh |
How Gratuity Is Calculated
The formula stays the same: Gratuity = (Last drawn salary × 15 / 26) × Number of completed years of service Salary includes basic pay and dearness allowance. If the last year has more than six months, it rounds up to the next full year.
Tax Exemption and Payment Timeline
The gratuity amount is tax-exempt up to 20 lakh rupees for employees under the Gratuity Act. The payment for the amount becomes due within thirty days only. Late payments attract simple interests of 10 percent per annum.
What It Means for You
The new regulations from 2026 make gratuity accessible and better. Now, even fixed-term employees have higher pro rata payment speeds, not to forget the 50% rule that helps employees having very high allowances. Keep your appointment letter, salary slip, and service duration records. Discuss with HR if closest to availing gratuity.
Gratuity is a loyalty and service rewarding valuable retirement benefit. The provision of the portability and language on several aspects of the Act can raise a debate. For more insights into this regard, please assess the company policy, or even an expert in labor laws could climb to the explanations of your own entitlement.
Also read: 8th Pay Commission DA Calculator 2026: Salary, Pension and Arrears, Check Details