Understand how gratuity works with notice periods, what happens if you don't serve full notice, and whether buyout affects your gratuity eligibility.
Planning to resign? You're probably wondering: Does the notice period count toward gratuity? What if I don't serve full notice? Here's everything you need to know.
Quick Answers
| Question |
Answer |
| Does notice period count for gratuity? |
Yes, fully |
| Notice buyout affects gratuity? |
No (service still counts) |
| Leave during notice counts? |
Yes |
| Salary during notice for gratuity calculation? |
Last drawn salary (not notice pay) |
Calculate your gratuity: Use our Gratuity Calculator.
Notice Period and Gratuity Service
Notice Period Counts as Service
| Scenario |
Service Counted |
| 4 years 10 months + 2 months notice |
5 years (eligible!) |
| 4 years 8 months + 2 months notice |
4 years 10 months (not eligible) |
| 5 years 0 months + 3 months notice |
5 years 3 months |
Important: Notice period is employment—it fully counts toward your 5-year gratuity eligibility.
The Magic of Notice Period Timing
| Your Completed Service |
Notice Period |
Total Service |
Gratuity Status |
| 4 years 9 months |
2 months |
4 years 11 months |
NOT eligible |
| 4 years 10 months |
2 months |
5 years 0 months |
ELIGIBLE |
| 4 years 6 months |
3 months |
4 years 9 months |
NOT eligible |
| 4 years 7 months |
3 months |
4 years 10 months |
Rounds to 5 → ELIGIBLE |
Planning tip: If you're close to 5 years, serve full notice period.
Notice Buyout and Gratuity
If You Buy Out Notice
| Scenario |
Impact on Gratuity |
| Pay to leave early |
Service counts till last working day |
| Example: 2-month notice, serve 15 days |
Only 15 days of notice counted |
If Employer Asks You to Leave Early
| Scenario |
Impact on Gratuity |
| Employer releases you early |
Full notice period counts |
| "Garden leave" |
Full period counts |
| Immediate termination with payment |
Service ends that day |
Example: Notice Buyout Impact
| Situation |
Gratuity Outcome |
| 4 years 11 months service |
Not eligible (6 days short) |
| + 1 month notice served |
Eligible (5 years now) |
| But: bought out after 15 days |
Service = 4y 11m 15d → Still eligible if rounds up |
Different Resignation Scenarios
Scenario 1: Resign After 4 Years 9 Months
| Option |
Service |
Gratuity |
| Serve 3-month notice |
5 years 0 months |
Eligible |
| Buyout full notice |
4 years 9 months |
Not eligible |
| Serve 2 months, buyout 1 |
4 years 11 months |
Rounds to 5 → Eligible |
Scenario 2: Resign After 6 Years
| Option |
Service |
Gratuity |
| Serve full notice |
6 years 3 months → 6 years |
Full gratuity |
| Buyout notice |
6 years |
Full gratuity (already qualified) |
| Partial notice |
Still 6+ years |
Full gratuity |
Scenario 3: At 4 Years 5 Months
| Option |
Service |
Reality Check |
| 3-month notice |
4 years 8 months |
Rounds to 5 → Eligible |
| 2-month notice |
4 years 7 months |
Rounds to 5 → Eligible |
| 1-month notice |
4 years 6 months |
Rounds to 5 → Eligible |
| Immediate exit |
4 years 5 months |
Not eligible |
The rounding rule (6+ months = next year) is your friend.
How Last Drawn Salary Works
Notice Period Salary ≠ Gratuity Calculation Base
| Situation |
Salary for Gratuity |
| Normal notice served |
Your regular Basic + DA |
| Notice with leave |
Same Basic + DA |
| Notice buyout |
Last drawn Basic + DA |
| Garden leave |
Regular Basic + DA |
Example: Salary During Notice
| Component |
Regular Salary |
During Notice |
Gratuity Calculated On |
| Basic |
₹50,000 |
₹50,000 |
₹50,000 |
| DA |
₹5,000 |
₹5,000 |
₹5,000 |
| Special allowance |
₹20,000 |
₹20,000 |
Not included |
| Gratuity base |
|
|
₹55,000 |
Leave During Notice Period
Does Leave Affect Gratuity?
| Leave Type |
Service Counted |
Gratuity Impact |
| Earned leave |
Yes |
None |
| Sick leave |
Yes |
None |
| Leave without pay |
Yes, for service count |
None on eligibility |
| Absent without leave |
May affect |
Discuss with HR |
Using Earned Leave During Notice
| Scenario |
What Happens |
| 2-month notice + 15 days EL |
Serve 45 days, encash 15 |
| EL encashment |
Separate from gratuity |
| Service count |
Full notice period counts |
Termination vs Resignation
Impact on Gratuity
| Exit Type |
Gratuity Eligibility |
| Voluntary resignation |
If 5+ years service |
| Termination (non-misconduct) |
If 5+ years service |
| Termination (misconduct) |
May be forfeited |
| Retrenchment/Layoff |
If 5+ years service |
| Company shutdown |
If 5+ years service |
Termination During Notice Period
| Scenario |
Outcome |
| You resign, employer terminates in notice |
Gratuity still payable |
| Termination for cause during notice |
May be forfeited |
| Employer ends notice early (no fault) |
Gratuity payable |
Strategic Resignation Timing
When to Resign (Gratuity Perspective)
| If You're At |
Best Strategy |
| 4 years 3 months |
Wait 3 months, then resign |
| 4 years 6 months |
Resign now (rounds to 5 with notice) |
| 4 years 8 months |
Resign now (notice takes you to 5) |
| 4 years 11 months |
Resign now (notice makes you eligible) |
Month-by-Month Decision Guide
| Current Service |
Action |
Why |
| 4y 0m - 4y 5m |
Wait a bit |
Not reaching 5 even with notice |
| 4y 5m - 4y 10m |
Can resign |
Notice + rounding = 5 years |
| 4y 10m+ |
Safe to resign |
Definitely eligible |
| 5y+ |
Anytime |
Already qualified |
Gratuity Amount: Does Delay Help?
Each Month of Extra Service
For ₹50,000 Basic + DA:
| Service |
Gratuity |
Extra Month Adds |
| 5 years |
₹1,44,231 |
— |
| 5y 6m → 6 years |
₹1,73,077 |
+₹28,846 |
| 6y 6m → 7 years |
₹2,01,923 |
+₹28,846 |
Each additional year adds ~₹29K at this salary level.
Is Staying Worth It?
| Current |
Wait Time |
Extra Gratuity |
Worth Waiting? |
| 5y 3m |
3 months |
₹0 (same year) |
No |
| 5y 5m |
1 month |
₹29K (rounds to 6) |
Maybe |
| 5y 7m |
0 months |
Already 6 years |
— |
| 6y 4m |
2 months |
₹29K |
Depends on new offer |
Common Questions
Q: I'm at 4 years 11 months. Can I resign?
Yes. Your 2-month (or longer) notice period will take you past 5 years.
Q: Employer is forcing immediate resignation. What about gratuity?
They can't force you to forfeit notice. Options:
- Insist on serving notice (they must pay you)
- Accept buyout (service still counts till date)
- Negotiate gratuity payment explicitly
Q: My offer needs me to join in 15 days, but gratuity needs 30 days notice
Options:
| Option |
Gratuity Impact |
| Request delayed joining |
Serves full notice |
| Buyout notice, take gratuity loss |
Lose eligibility if borderline |
| Negotiate with new employer |
Best option |
Q: Does gratuity get taxed differently if I leave early?
No. Gratuity tax exemption (up to ₹20L) is based on amount, not exit type.
Checklist Before Resigning
| Check |
Status |
| Calculate total service including notice |
__ years __ months |
| Service rounds to 5+ years? |
Yes / No |
| Last drawn Basic + DA noted |
₹________ |
| Gratuity amount estimated |
₹________ |
| Notice period duration known |
__ months |
| New employer joining date flexible? |
Yes / No |
Calculate your gratuity amount: Use our Gratuity Calculator to know exactly what you'll receive.
