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Gratuity Calculator
Simply enter your details to calculate your Gratuity .
All fields are mandatory *
Let’s understand what gratuity and gratuity calculator are.
What is Gratuity?
But not every employee is eligible to receive the gratuity benefit. The payment rules of gratuity fall under the Payment of Gratuity Act, 1972. This Act determines an employee’s eligibility to receive the gratuity amount.
Here are some rules for gratuity payment under the Payment of Gratuity Act, 1972-
- The employee must be employed at the organisation for at least 5 years continuously.
- The employee shouldn’t be employed with any other full-time employer during this period.
- The employee must be eligible for superannuation.
- The employee should have resigned from his/her job after being employed at the same company for five years.
But the employee can receive the gratuity benefit before 5 years if he/she is injured or disabled due to an accident or disease. Also, in case of the employee’s death, the gratuity benefit can be provided before 5 years.
What is a Gratuity Calculator?
How to Use a Gratuity Calculator?
- Enter Your Salary
Input your last drawn basic salary, including Dearness Allowance (DA). - Enter Years of Service
Provide the total number of years you have worked in the organisation. - Select Coverage Type
Choose whether your organisation is covered under the Payment of Gratuity Act, 1972. - Click Explore
The calculator will apply the relevant formula and instantly display the gratuity amount. - Plan Your Finances
Use the result to make informed decisions about investments or savings.
Gratuity Calculation Formula
- Employees Covered Under the Act
- Employees Not Covered Under the Act
Gratuity Calculation Formula for Employees Covered Under the Act
In this formula,
n is the number of years the employee was employed at the organisation
b is the basic monthly salary that was last drawn (This consists of dearness allowance and commission received on sales, if any)
The number of working days in a month is considered 26 days.
The wages for gratuity are calculated at the rate of 15 days.
Let’s understand the formula with an example-
Mr. Parmar leaves his organisation after eight years. His last drawn basic salary was Rs. 2 Lakhs.
Gratuity= 2,00,000*8*(15/26)
Gratuity= Rs. 9,23,076
Gratuity Calculation Formula for Employees Not Covered Under the Act
The formula for employees not covered under the Act is-
Gratuity= n*b*15/30
For example-
Mrs. Sood leaves her company after 10 years. Her last drawn basic salary was Rs. 1 Lakh.
Gratuity= 1,00,000*10*(15/30)
Gratuity= Rs. 5,00,000
While an individual can calculate his/her gratuity value, manual calculations can lead to errors. However, by using a gratuity calculator, individuals can avoid such mistakes and get the correct result easily.
What are the Benefits of a Gratuity Calculator?
A gratuity calculator simplifies the process of estimating your gratuity payout, ensuring quick and accurate results. Here’s why it’s beneficial:
- Eliminates Errors
Manual calculations can lead to mistakes, especially when dealing with complex formulas. A gratuity calculator provides precise results instantly. - Saves Time
No need to perform lengthy calculations; simply enter your details, and the tool does the rest. - Easy to Use
With just your monthly salary and years of service, you get an accurate estimate of your gratuity amount. - Financial Planning
Knowing your gratuity value helps you plan for retirement, investments, or future financial goals. - Accessible Anytime
Available online, you can calculate your gratuity on the go, whenever you need.
Tax Rules on Gratuity
Gratuity Amount Investment Options
How is the Gratuity Payment Made?
The payment of gratuity value can be made in a cheque, cash, etc. Furthermore, employees must apply for the payment within 30 days from the date gratuity becomes payable.
When is the Gratuity Amount Payable to an Individual?
- Retirement
- Resignation or Termination
- Layoff
- Disablement or death due to a disease or an accident
Tax Rules for Government Employees
Tax Rules for Non-Government Employees Covered Under the Act
- The gratuity limit
- 15/26*Last drawn salary*A year of service or part thereof which is in excess of 6 months
- The gratuity amount received
Tax Rules for Employees Not Covered Under the Act
- The gratuity limit
- Half month’s average salary*The number of years of service
- The gratuity amount received
Saving money for post-retirement life is crucial. With the help of gratuity, individuals can accumulate funds for a stress-free life after retirement.
Gratuity Calculator FAQs (Frequently Asked Questions)
Is the gratuity amount received by government employees exempted from tax?
Yes, the gratuity amount received by government employees is fully exempt from tax.
What is the exemption limit for the gratuity amount received by non-government employees covered under the Act?
The tax-exempt gratuity amount is: ₹20 lakh (the maximum limit), 15/26 × last drawn salary × years of service, or the actual gratuity received.
What is the exemption limit for the gratuity amount received by employees not covered under the Act?
For employees not covered under the Act, the tax-exempt gratuity is the lowest of: ₹10 lakh (the maximum limit), half a month’s average salary × years of service, or the actual gratuity received.
How to calculate gratuity manually?
For employees covered under the Act, the formula is Gratuity = (Last Drawn Salary × Years of Service × 15) / 26. For those not covered, the denominator changes to 30.
Can an organisation refuse to pay gratuity? If yes, when and how?
Yes, an organisation can refuse to pay gratuity if an employee is terminated due to misconduct, fraud, or moral wrongdoing. This must be in accordance with company policies and labour laws.
Where should you invest your gratuity funds?
You can invest your gratuity funds in FDs for safety, mutual funds for growth, pension plans for long-term security, or debt instruments for balanced returns. You can choose based on your financial needs and risk tolerance.
DisclaimerThe information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.