Is gratuity part of your CTC, or on top of it?
Your offer letter puts gratuity inside the CTC. Whether it belongs there is genuinely disputed, and the answer changes what your offer is worth. What it is, when you get it, and what to check before you sign.
Almost every Indian offer letter counts gratuity inside the CTC. Ask whether it belongs there and you get two confident, opposite answers, which is why this question fills Quora threads and HR forums rather than resolving.
Both answers are right about different things.
The short version
In practice, it is inside your CTC. Most employers include it, and yours almost certainly does. Check your offer letter for a line worth roughly 4.81% of basic pay.
In principle, many argue it should not be. Gratuity is a statutory benefit under the Payment of Gratuity Act, 1972, payable by the employer on completing five years. The Act contains no provision for deducting it from an employee, so putting it in a package that is presented as your compensation is contested. HR communities and labour lawyers argue this one at length and have not settled it.
You are unlikely to change your employer’s practice. What you can do is read the number correctly.
Why it matters for what you are being offered
Gratuity inside CTC is money you will probably never receive.
The rule is five years of continuous service with the same employer. Leave at four years and eleven months and you get nothing, with the only exception being death or disablement. Median tenure in Indian tech and services is well under five years, so for most people this line is a number in a document rather than a payment.
It is still real money if you stay. It is simply contingent, and contingent money counted at full value inflates the offer.
How the figure is calculated
The formula is fixed by the Act:
Last drawn salary × 15 ÷ 26 × completed years of service
“Last drawn salary” means basic pay plus dearness allowance, not your CTC and not your take-home. The 26 is a working month, so 15 ÷ 26 works out to roughly 4.81% of annual basic set aside each year. That is the figure your employer adds into the CTC.
On a ₹12,00,000 CTC with basic at 40%, that is about ₹23,000 a year sitting inside the number you were offered.
The payout is capped at ₹20 lakh, and up to that ceiling it is tax-free for private-sector employees.
What to check before you sign
Two offers with the same CTC are not the same offer if one loads more into gratuity. Ask for the breakup, find the gratuity line, and read the CTC as three separate things rather than one.
Tax is gone. Provident fund is yours but locked. Gratuity is yours if you stay, which is a third thing again, and it is the one most likely to quietly never arrive.