Gratuity Eligibility in India: How Many Years of Service Do You Need?
By Varun M
The minimum tenure for gratuity eligibility in India comes down to two numbers — 5 years for permanent employees, 1 year for fixed-term — plus one rule that trips people up: a six-month rounding convention that affects your payout, not whether you qualify at all.
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The short answer
Permanent employees: eligible after 5 years of continuous service. Fixed-term employees: eligible after 1 year — a new, lower threshold under the Code on Social Security, 2020. Both thresholds are based on actual months of service, not a rounded figure.
Where the line actually falls
Take a permanent employee earning ₹22,000/month in wages:
| Service | Eligible? | Gratuity |
|---|---|---|
| 4 years 7 months (55 months) | No | ₹0 |
| 5 years 2 months (62 months) | Yes | ₹63,461.54 |
That first row is the important one: 4 years 7 months is not eligible, even though the 7-month remainder is more than half a year. This is a common point of confusion — people assume the six-month rounding rule means "more than 6 months past 4 years rounds up to 5 years of eligibility." It doesn't. The rounding rule only counts completed years for the payout formula once you're already past the eligibility threshold (60 months for permanent employees). Below that threshold, you get nothing, regardless of how close you are.
The two thresholds
- Permanent employees: 5 years (60 months) of continuous service.
- Fixed-term employees: 1 year (12 months) — see gratuity after 1 year for fixed-term employees for a detailed walkthrough of this boundary.
Once you're eligible: how the payout is calculated
Past the threshold, your completed years are counted with the six-month rounding rule, and the gratuity itself uses the 15/26 formula — see the gratuity formula (15/26) explained, or look up a rough figure directly on the gratuity calculation chart.
None of this changes by where you work or what industry you're in — see gratuity in Mumbai, Bangalore, Delhi & Chennai and gratuity for IT and software employees if that's the question behind your search.
FAQ
5 years of continuous service if you're a permanent employee. If you're a fixed-term employee, just 1 year — a new, lower threshold under the Code on Social Security, 2020.
No — this is a common misunderstanding. The 6-month rounding rule affects how your completed years are counted for the payout FORMULA once you're already eligible; it doesn't lower the eligibility threshold itself. 4 years 7 months (55 months) is still short of the 60 months required for permanent employees, so it doesn't qualify.
You become eligible for gratuity based on your full completed service, calculated using the 15/26 formula and rounded per the six-month rule. For example, 5 years 2 months of service counts as 5 completed years for the payout.
No — continuous service generally accommodates normal leave, holidays, and similar interruptions; it refers to your employment not being broken (e.g., by resignation and rehire). Confirm the precise definition for your situation with HR or a professional if it's in question.
Yes — permanent employees need 5 years of continuous service; fixed-term employees need just 1 year. This is one of the more employee-favourable changes in the new labour codes.
5 years of continuous service for permanent employees, or 1 year for fixed-term employees under the Code on Social Security, 2020. This is the minimum tenure requirement — there is no separate "gratuity eligibility period" beyond these two thresholds.
Last verified: 11 Aug 2026
Sources: Code on Social Security, 2020.
This is an indicative estimate based on the gratuity eligibility rules as understood at the time of writing. The completed-years rounding rule and the final Central Rules were not fully confirmed as of this verification date. Confirm your exact entitlement with your employer's HR/payroll team or a qualified professional before relying on this for financial decisions.