Are you wondering how much gratuity you’re entitled to after years of dedicated service?
Gratuity Calculator
What is Gratuity?
Gratuity is a financial benefit provided by employers to employees as a token of appreciation for their long-term service. Under the Payment of Gratuity Act 1972, any employee working in a private company with EPF facilities is eligible for gratuity after completing 5 years of continuous service. However, employees can also claim gratuity before 5 years in cases of disability due to an accident or illness.
How is Gratuity Calculated?
The gratuity amount depends on your last drawn salary (Basic + DA) and the number of years served. The formula used to calculate gratuity is:
Gratuity = (Last Drawn Salary × Years of Service × 15) / 26
For example, if your last drawn salary is ₹30,000 and you’ve worked for 5 years, your gratuity will be:
Gratuity = (30,000 × 5 × 15) / 26 = ₹86,538.46
Key Rules for Gratuity Calculation
- Maximum Limit: The gratuity amount cannot exceed ₹20 lakh for employees covered under the Payment of Gratuity Act.
- Rounding Off: If you’ve worked for 17 years and 6 months, it will be rounded off to 18 years.
- Tax Exemption: Government employees are fully exempt from tax on gratuity. For private-sector employees, the least of the following is tax-exempt:
- ₹20 lakh
- Actual gratuity received
- 15 days’ salary for each completed year of service
How to Use Gratuity Calculator
- Enter your monthly salary (Basic + DA).
- Enter the number of years you’ve worked.
- Click Calculate Gratuity to see the amount you’re eligible for.
Why Use Gratuity Calculator?
- Accurate Results: Our calculator uses the standard gratuity formula to provide precise results.
- Easy to Use: No technical expertise is required.
- Free and Secure: Use it anytime, anywhere, without worrying about data security.
- Financial Planning: Helps you plan your finances by estimating your gratuity amount.
FAQs
1. What is Gratuity?
Gratuity is a lump-sum amount paid by an employer to an employee as a token of gratitude for the services rendered by the employee over a long period. It is typically paid at the time of retirement, resignation, or death.
2. Who is eligible for Gratuity?
- Employees who have completed 5 or more years of continuous service with the same employer are eligible for gratuity.
- In case of an employee’s death or disability, the 5-year rule may not apply.
3. Is Gratuity Taxable?
- Gratuity is tax-free up to a certain limit as per the Income Tax Act.
- For government employees, the entire gratuity amount is tax-free.
- For private sector employees, the tax-free limit is ₹20 lakh (as of the latest updates).
4. Can I use this Gratuity Calculator for any country?
This calculator is designed based on Indian gratuity rules and formulas. If you are from another country, please check the local labor laws and gratuity calculation methods.
5. What is the maximum limit for Gratuity?
As per the Payment of Gratuity Act, 1972, the maximum gratuity amount payable is ₹20 lakh. Any amount above this is subject to the employer’s discretion.
6. What if I resign before completing 5 years?
If you resign before completing 5 years of continuous service, you are not eligible for gratuity unless it is due to death or disability.
7. Can I calculate Gratuity for part-time service?
Yes, you can calculate gratuity for part-time service. However, the years of service should be calculated proportionately based on the number of working days.
8. What is the role of Dearness Allowance (DA) in Gratuity Calculation?
Dearness Allowance (DA) is a cost-of-living adjustment allowance and is included in the calculation of the last drawn salary for gratuity.