No, not if you are a regular employee: under the Code on Social Security, 2020, gratuity is owed only after five years of continuous service, so leaving even a few months short can leave you with nothing. The exceptions are death or disablement, fixed-term contracts (one year), working journalists (three years) and better company terms. Some High Courts have also counted 4 years and 240 days (190 in a five-day-week office) as five years; below, Nandini's ₹1,00,000 basic and a table from ₹75,000 to ₹2,00,000 price the gap.

What does the five-year rule say, and who is exempt?

The Code replaced the Payment of Gratuity Act, 1972 from 21 November 2025 and kept its core rule: if your employer has ten or more employees, gratuity is paid when employment ends after five years of continuous service. Sickness, approved leave or a lay-off does not break continuous service, and your notice period counts, because you are employed until your last working day.

On gratuity eligibility, fixed-term employees are paid pro rata after one year, and under section 53(5) of the Code a contract or company policy can pay on better terms than the five-year rule.

Once you qualify, the gratuity formula is last drawn monthly wages × 15/26 × completed years, with a part year of more than six months counted as a full year. Wages are basic plus dearness allowance (and any retaining allowance); if allowances and the employer's PF come to more than half your total pay, the excess is added back, as salary components explains.

What does leaving at 4 years 7 months cost? Nandini's ₹2,88,462

Nandini has 4 years and 7 months of continuous service on a basic of ₹1,00,000 a month, exactly half of her ₹2,00,000 total monthly pay counting the employer's PF, with no dearness allowance. Nothing is added back, so her wages for gratuity are ₹1,00,000; her CTC is about ₹24.6 lakh. A new employer wants her to start in three weeks.

If she stays to five years, her gratuity is ₹1,00,000 × 15 ÷ 26 = ₹57,692 for each year of service, times 5 = ₹2,88,462. It is tax-free: in FY 2026-27, gratuity received on leaving is exempt up to the formula amount, within a lifetime ₹20,00,000, under section 10(10) of the Income-tax Act, 1961 (section 19 of the 2025 Act).

If she leaves in three weeks, the five-year rule gives her nothing. The six-month round-up only sets the amount once she qualifies; it does not turn 4 years 7 months into five. A court-made reading, below, may change that.

How much is 5 years of gratuity at other basics?

The table assumes basic is half of total pay, so it equals wages for gratuity; each CTC includes the 4.81% gratuity line explained in why take-home is lower than CTC. Dearness allowance or a wage add-back raises the figures.

Monthly basic CTC, about Leave at 4 years 7 months (five-year rule) Leave at 5 years
₹75,000 ₹18.4 lakh ₹0 ₹2,16,346
₹1,00,000 ₹24.6 lakh ₹0 ₹2,88,462
₹1,25,000 ₹30.7 lakh ₹0 ₹3,60,577
₹1,50,000 ₹36.9 lakh ₹0 ₹4,32,692
₹2,00,000 ₹49.2 lakh ₹0 ₹5,76,923

Does 4 years and 240 days count as five years?

Sometimes, in court. Under section 2A of the 1972 Act, an employee who actually worked 240 days in a year was treated as having served that year, or 190 days where the establishment works fewer than six days a week. The Madras, Kerala and Delhi High Courts applied this to the five-year rule, though not every court agrees. Section 54 of the Code keeps the test, but no reported ruling has yet applied this reading to it.

"Actually worked" is read generously: in 1985 the Supreme Court, on the same words in the Industrial Disputes Act, counted every paid day, weekends and holidays included. Nandini's office works five days a week, so the bar is 190 paid days, and seven months into her fifth year she has about 213. On that reading she may already qualify; at a 240-day bar she would be about four weeks away. Her employer can still refuse, leaving a claim before labour authorities.

Does a later last working day save your gratuity?

Yes, if it falls after your fifth anniversary of joining; notice counts. For Nandini that is five months away: the only certain route. She can ask the new employer for that start date, or for a joining bonus to cover the gap, though joining bonuses usually carry a clawback. A bonus is taxed as salary: if her new salary takes her FY 2026-27 taxable income above ₹24 lakh before the bonus, and it stays within ₹50 lakh, tax and 4% cess take 31.2%, so it takes about ₹4,19,276 to leave her ₹2,88,462.

If the new employer will not wait, serving her full notice instead of buying it out moves her last day later: further past 190 paid days and, once it is four weeks or more away, past 240 as well. That helps a claim on the court reading but is still short of five years. Before resigning, she can ask HR in writing how service is counted. Once due, gratuity must be paid within 30 days, usually alongside the full and final settlement.

Dhi answers questions like what leaving before your fifth work anniversary would cost, from your own numbers and alongside your cash flow, net worth, protection and goals. Dhi earns no commissions and nudges you when something needs attention.

Frequently asked questions

Generally no. Continuous service is counted with one employer, so a job change restarts the five-year clock. If your employment moved with the business in a merger or a group transfer, check your transfer letter for whether past service was carried over.
No, not if the employer approved it: under section 54 of the Code on Social Security, 2020, service interrupted by leave still counts as continuous, so a sabbatical does not restart the five-year clock. Unpaid days do matter if you rely on the 240-day reading, because only paid days count towards it.
Yes. Continuous service runs from the day you joined, so probation counts towards the five years. Only a break the employer formally records under its rules, such as unauthorised absence treated as a break in service, stops the clock.

This is general information for salaried individuals in India, not personalised financial advice.