Enter your final month’s salary and years of service to calculate your gratuity amount.
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Use this gratuity calculator online to estimate how much gratuity amount you are eligible to receive upon retirement, resignation, or disability. The calculation is based on your basic salary and total years of service, as per the provisions of the Gratuity Act, 1972 in India.
Gratuity is the amount that an employer pays to his staff as a form of appreciation for their continuous long service.
However, it is a form of social security benefit provided to employees when they resign, retire, or terminate after completing five years or more of service.
It is governed by labor laws and the Payment of Gratuity Act of 1972. Employees can receive gratuity before 5 years of service if he/she suffers a disability from an accident or a disease.
To be eligible for payment of gratuity, an employee typically must meet certain criteria, which often include:
Act-Based Gratuity Formula:
G = n*b*15 / 26
Where:
Gratuity Calculation for Non-Act Covered Employers:
Employees whose employers do not fall under the Gratuity Act will have their gratuity calculated as half a month's salary on each completed year of service. The formula is as:
Gratuity = 15 * Your last drawn salary * the working tenure / 30
An employee worked for a company for 9 years and 4 months and has a last drawn basic salary of $2,000 per month. What is the gratuity amount payable to the employee?
Step 1: Determine the completed years of service
Since the employee worked for 9 years and 4 months, only 9 full years are considered.
Step 2: Use the gratuity formula
Gratuity = (15 * your last drawn salary * tenure of working) / 26
Step 3: Substitute the values
G = 2000 * 9 * 15 / 26
G = 270,000 / 26
G = 10,384.62
The gratuity amount payable to the employee is $10,384.62.
Gratuity is taxable income yet there are certain exemptions available under the Income Tax Act. The rules for tax exemptions vary among employees based on the type of employers and their stance under the Gratuity Act.
When your employee is not governed by the Gratuity Act, you can claim a tax exemption on the smaller of these amounts:
✔️ Enter the salary (Basic Pay + D.A)
✔️ Enter the years of service (at least 5 years of service required)
✔️ Click on the “CALCULATE” button
✔️ The gratuity amount calculator estimates the total gratuity amount payable to you
Here are two points that are important to be considered:
15 means the salary of fifteen days for each year of service and 26 are the working days in a month excluding weekly off days.
Gratuity is typically paid upon:
Payment of Gratuity Act is a law that mandates the payment by employers to employees after retirement for their long-term services. This law also refers to Indian law implemented in 1972 for employees engaged in factories, mines, shops, or establishments with 10 or more workers for their long-term services.
The short form of dearness allowance is D.A. It is an additional payment to account for inflation. In India, Pakistan, and Bangladesh, D.A. allowance is provided to government servants and retirees to alleviate their financial burden.
Ex-gratia is a voluntary payment made by the employer that exceeds the maximum gratuity limit of 20 lakhs. It is not a legal entitlement.
"Centre clears bill to double tax-free gratuity to Rs 20 lakh" Economic Times of Indias
"Payment of Gratuity in India" Chief Labour Commissioner (Central)
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