How this is worked out
Gratuity is worked both ways, by the service regulations and by the Code on Social Security, and the higher is paid within the ceiling. Leave encashment is your last basic + DA ÷ 30 for each day of PL up to 255. Commutation is a third of your basic pension × 12 × the factor. This is the working in Chapter 16 of The Banker’s Money Book.
NPS and PF are paid separately; see the retirement planner for the whole picture.
Questions bankers ask
How is a bank employee’s gratuity worked out?
The higher of two: under the bank’s service regulations, one month’s basic for each completed year up to 15 months, plus half a month for each year beyond 30; and under the Code on Social Security, 15/26 of last basic + DA for each completed year (more than six months counts as a year). Both within the ₹20 lakh ceiling, and only after five years’ continuous service.
How many days of leave can I encash?
Up to 255 days of privilege leave at retirement under the 12th BPS, each day worth last basic + DA ÷ 30. Days above 255 lapse, so take them as leave before your last day.
What is commutation?
Pension optees can take a third of their basic pension as a lump sum: that third × 12 × the commutation factor (9.81 at age 61 next birthday). The commuted third comes back after 15 years, and dearness relief stays on the full pension.
Is last-day money taxed?
Gratuity is tax-free up to ₹20 lakh and leave encashment up to ₹25 lakh over your working life. The commuted pension is tax-free for those who also get gratuity.
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Indicative figures for planning. They follow the 12th Bipartite Settlement and 9th Joint Note (8 March 2024), IBA’s DA circular of 2 November 2026 and the Income-tax Act, 2025, as on 12 November 2026. Your bank’s payslip, service regulations, circulars and Form 16 prevail. Bankers Pioneer Academy is independent; not affiliated with IBA, IIBF, the Reserve Bank of India or any bank. Nothing you type here leaves your device.