Which is better- Dropping out to prepare for GATE or getting a job and preparing alongside?

See, its completely your wish. If you seriously willing to do job and if you think you will have enough time for Gate preparation then go for it. But I would say just keep one thing in your mind that you wont be getting too much time for study if you choose this option. Or if you want to dedicate your time to Gate completely then you can drop the year to start your GATE preparation. So decide wisely.