Gratuity Calculator Formula | Check Gratuity Act – Rules, Eligibility & Period

Gratuity Calculator Formula | Check Gratuity Act | Gratuity Calculator Formula Eligibility | How can we use the Gratuity Calculator

Gratuity Calculator

The Gratuity Calculator determines the lump sum amount that a person may get upon leaving a job after working for at least five years in a row.

Gratuity Calculator

What is Gratuity?

Gratuity is the sum paid by an employer to an employee in exchange for services rendered to the firm. However, the gratuity is only paid to employees who have worked for the company for five years or more. The Payment of Gratuity Act of 1972 governs it. If the employee is injured in an accident or owing to a disease, he or she can get the gratuity sooner than five years. The amount of gratuity you receive is largely determined by your most recent income and the number of years you have worked for the company.

Advantages of Using the Gratuity Calculator

  • The Gratuity Calculator is a simple tool that allows you to enter your basic salary and years of service. It calculates the amount of gratuity you’ll receive after five years of continuous service.
  • In a matter of seconds, the gratuity calculator will display the gratuity values. It assists you in budgeting by allowing you to invest the gratuity wisely for the best possible return.
  • To calculate the gratuity amount, you can use the gratuity calculator from the comfort of your own home or virtually anywhere.

PF Withdrawal

Eligibility Criteria to be fulfilled for Payment of Gratuity

To be eligible for the gratuity, you must meet the following eligibility criteria:

  • You should be eligible for superannuation.
  • You should have retired from service.
  • After five years of continuous employment with the organization, you should have resigned.
  • The gratuity is paid to your nominee in the event of your death, or to you if you become disabled due to illness or an accident.

All about Gratuity Calculator

The Gratuity Calculator would calculate the gratuity amount using the formula for gratuity calculation.

Gratuity Formula= (15 * your last drawn salary * tenure of working) / 26

A gratuity calculator is a tool that estimates the amount you would earn if you left your job after five years of continuous service. It’s a useful tool for calculating the gratuity when you leave the company. In a couple of seconds, the gratuity calculator would display the gratuity amount. It’s easy to use and can be used multiple times.

The last drawn salary and the length of continuous service with the company must be entered. Your basic wage, dearness allowance, and sales commission are all included in your most recent drawn salary.

Income Tax Deductions

Formula for Calculating the Gratuity

  • The following formula can be used to compute the amount of gratuity for employees whose employer is covered by the Gratuity Act:

Gratuity = n*b*15 / 26

  1. Where n denotes the tenure of service completed in the company
  2. And b denotes the last drawn basic salary + dearness allowance
  3. For example, you have 15 years of experience with the XYZ Company. Your most recent basic pay, including dearness allowance, was Rs 30,000. Hence:
  4. The gratuity is calculated as follows: 15 * 30,000 * 15 / 26 = Rs 2, 59,615

Points to Keep In Mind:

  • The gratuity sum cannot exceed Rs 20 lakh, according to the Gratuity Act. Excessive behavior would be viewed as ex-gratia.
  • If the number of years you worked in the previous year of employment is greater than six months, it will be rounded up to the nearest whole number.Eg,if your service period is 16 years and 7 months, you will be paid a gratuity for 17 years. However, If your service period is 16 years and 4 months, you will be paid a gratuity for 16 years
  • The gratuity amount would be calculated based on the half-month wage on each completed year of service for employees whose employer is not covered by the Gratuity Act.

(15 Times your last drew salary * your working tenure) / 30 is the formula.

  • For example, you earn Rs 30,000 per month as a base income. You have worked for the company for seven years and the employer is not covered by the Gratuity Act.

Amount of Gratuity = (15 * 30,000 * 7) / 30 = Rs 1, 05,000.

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How can we use the Gratuity Calculator?

Calculate your gratuity using the Gratuity Calculator by following the steps given below:

  • First of all, you need to enter the basic salary and the dearness allowance if applicable, by using the slider.
  • After that, you need to enter the number of years you’ve worked for the company.
  • In a couple of moments, the gratuity calculator would determine the whole gratuity amount due to you.
  • By adjusting the input sliders, you can compute the gratuity again at any time.
  • When you move the sliders, the gratuity will be calculated instantly.

Taxation Rules for Gratuity

The tax treatment of a gratuity is determined by the kind of employee who must receive it.

  • Any gratuity received by a government employee (whether from the central, state, or local government) is tax-free.
  • Any other qualifying private employee whose employer is subject to the Gratuity Payment Act. In this case, the least of the following three amounts will be tax-free:
  • 20 lakh rupees
  • The amount of gratuity that was received.
  • The gratuity that is eligible.
  • Your company, for instance, had given you a gratuity of Rs 12 lakh. According to the gratuity computation in the previous example, you are entitled to Rs 2, 59,615. The top tax-free limit has been set by the government at Rs 20 lakh. The least expensive of the three amounts is Rs 2, 59,615, which is tax-free. You must pay income tax on the remaining Rs 9, 40,385 based on your tax slab.
  • Keep in mind that the highest tax-free gratuity sum you can claim in your whole working life is Rs 20 lakh.

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After 4.5 years on the job, I decided to resign. Is it possible for me to receive a gratuity?

To be eligible for a gratuity, you must have completed at least five years of continuous service. However, the gratuity would be paid before five years of service if the employee died or became disabled due to illness or an accident.

Will the gratuity amount shown by the Clear Tax Gratuity Calculator be accurate?

Yes, as long as you enter the relevant data. If applicable, you must include the basic wage as well as the dearness allowance. To get an exact gratuity amount, five or more years of continuous service must also be entered.

Is there a cap on the amount of gratuity you’ll get?

Yes, regardless of the number of years of service, a company’s gratuity payment cannot exceed Rs 20 lakh.

Will a contract employee earn gratuity after five years of service?

If a person is listed on the company’s payroll, he is considered an employee. As per the guidelines, he will be paid a gratuity. However, if he works for a contractor who is not a corporate employee, the contractor is responsible for paying the gratuity.

How long does it take the employer to release the gratuity money?

Within 30 days of the date on which the gratuity becomes payable, an employee who is eligible to receive it can file an application. Within 15 days of receiving the application, the employer must specify the amount of the gratuity. The claim for a gratuity, on the other hand, will not be invalidated just because the claimant failed to file the application within the deadline. The gratuity must be given within 30 days of the application form being received by the employer. If the employer fails to meet the deadline, he must pay the gratuity amount plus simple interest.

Will my gratuity be forfeited if my employer goes bankrupt?

Even if your employer goes bankrupt, your gratuity will be paid. No court order can prevent the gratuity amount from being paid.

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