Gratuity Calculator





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What is Gratuity in India?

A gratuity calculator is a tool to estimate the gratuity that one earns once he leaves a job after completing at least five years in company. Gratuity is that the monetary benefit an employee receives in lumpsum by the corporate . The corporate pays it as a gratitude for his/her services to the corporate . The motive behind gratuity payments is to supply retirement benefits to the workers . The Payment of Gratuity Act, 1972 governs the gratuity and its payment rules. Under this Act, an employee has got to fulfill specific criteria to be eligible for gratuity payment. the worker must work for a minimum of five years within the company continuously. the worker must not have another full-time employer. just in case of death or disability of the worker , even before completion of 5 years, the worker is eligible for gratuity. The gratuity amount cannot exceed INR 10 lakhs. the surplus , if any, falls under ex-gratia. Ex-gratia may be a voluntary contribution and not compulsorily imposed by law.

The number of months of service is critical in gratuity calculation. within the last year of employment, if the worker works for quite six months, it’s rounded off to subsequent numbers. for instance , if an employee works for 15 years and seven months, the amount of years of service is going to be 16 years. However, if the worker works for less than 15 years and five months, the amount of years of service are going to be 15 years.

The Payment of Gratuity Act, 1972, prescribes rules for the calculation of gratuity. Under these rules, there are two categories of employees. Namely, employees covered under the Act and employees not covered under the Act. The Act also lists criteria for the organizations that fall into the purview of the Act.

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Gratuity Calculator Formula

The Payment of Gratuity Act, 1972, prescribes the principles and calculation of the Gratuity Amount. The Act classifies the workers under two categories:

Category 1: Employees covered under the Act

Category 2: Employees not covered under the Act

The above-mentioned categories apply to both private and government employees. However, for state employees, the pay structure varies and hence has additional heads to be accounted for.

How to Calculate Gratuity?

Using the Gratuity Calculator Formula, one can determine the gratuity amount.

Gratuity (G) = n*b*15/26

n = the amount of completed years within the current organization

b = the Last drawn basic monthly salary (plus dearness allowance, the commission received on sales, if any)

How can a Gratuity Calculator help you?

Upon meeting the eligibility criteria for Gratuity of:

Age of superannuation

Five years of employment at the present organization

Have no other fulltime employment

The user can use the Gratuity Calculator Online in India to work out the Gratuity Amount. Following are the advantages of using the calculators:

  • Determining the accurate gratuity value.
  • The results are fast, and therefore the calculator is out there for free of charge .
  • Online gratuity calculators save time from doing the calculations manually.
  • The calculators are often accessed from anywhere at comfort.
  • It helps in future financial planning. it’s essential to take a position wisely instead of holding the quantity during a savings checking account . The returns from savings bank accounts don’t beat the rate of inflation . Therefore leads to negative returns. Hence, investors got to invest their gratuity amount to earn significant returns.
  • Eligibility for a private to receive Gratuity in India

To be eligible to receive gratuity benefits, the worker must fit into the subsequent criteria:

  • The individual must be eligible for superannuation.
  • The individual must have resigned from the work after working for five years continuously
  • He/she shouldn’t have the other full-time employer.
  • He/she must be retired from work .
  • In case of death, disability, or sickness of the individual, there’s an exception to the five years criteria. the workers needn’t meet the condition to figure five years continuously just in case of disability or death.

Payment of Gratuity

Gratuity may be a lumpsum amount paid at the time of retirement to employees as gratitude after completion of 5 years of service. there’s no fixed percentage provided by law for calculating the particular gratuity amount. However, the gratuity amount depends on two things.

  • The last monthly salary or basic pay drawn
  • The number of years of service
  • These two inputs help calculate the gratuity amount. Also, the gratuity calculator makes it easier to calculate the gratuity amount.

The gratuity payments are often made in cash, cheque, or demand draft. However, to receive the gratuity amount, the eligible employee has got to apply within 30 days from the dates it becomes payable. Also, the employer must pay the worker within 30 days from the date of receipt of the appliance .

Which organization is eligible for Gratuity?

The Payment of Gratuity Act extends to the entire of India. It shall apply to:

  • Every factory, mine, plantation, port, and therefore the railway company
  • Every shop or establishment within the meaning of any law. during which ten or more employees are employed or were employed on any day of the preceding 12 months.
  • Every shop or establishment during which ten or more employees are employed or were employed on any day of the preceding 12 months because the central government may specify.
  • In other words, any organization having ten or more employees on one day within the last 12 months comes under the purview of the Payment of Gratuity Act, 1972.

Who is eligible for Gratuity?

To be eligible to receive gratuity payments, the worker must fit into the subsequent criteria:

  • The individual must be eligible for superannuation.
  • The individual must have resigned from the work after working for five years continuously
  • He/she shouldn’t have the other full-time employment.
  • He/she must be retired from work .
  • In case of death, disability, or sickness of the individual, there’s an exception to the five years criteria to receive gratuity benefits. the workers needn’t meet the condition to figure five years continuously just in case of disability or death.

What are the tax rules for Gratuity?

Gratuity received by an employee is taxable under the top ‘Income from Salary’. The tax department, under the tax Act, has declared gratuity tax-exempt up to a particular limit. they’re different for state employees, non-government employees covered under the Act, and non-government employees not covered under the Act.

For government employees, the whole gratuity amount is fully exempt from tax.

For non-government employees covered under the Act, the utmost tax exemption is least of the following:

Half month’s average salary x Completed years of service

INR 10,00,000 is that the gratuity limit

Gratuity received

All employees need to suits the tax Department regulation for the aim of tax filing. The tax Act prescribes the principles for tax filing. When is gratuity payable to an employee?

Gratuity is payable to an employee upon

  • Retirement
  • Resignation or termination
  • Layoff
  • Voluntary retirement Scheme
  • Disability or death
  • However, the worker must complete a period of 5 years of continuous employment altogether the above cases apart from disability or death.

Can a corporation refuse to offer a gratuity, when and how?

An employee who met the eligibility criteria are often rejected by the organization if

  • The employee’s services have destroyed the property of the employer
  • The employee’s Act is violent or disorderly.
  • The employee has committed an offence involving moral turpitude
  • Where can one invest the payment gratuity amount received?
  • The payment gratuity amount one receives is often invested within the following saving schemes or investment plans.