Gratuity Calculator 2024

Gratuity is a financial benefit provided by employers to employees as a token of appreciation in return for his services towards the company. It’s applicable only to employees who have been employed by the company for minimum five years atleast. The act is governed by Payment of Gratuity act, 1972. It acts as a financial clout and provides safety net for the employee’s future after their retirement.

The employee can get the gratuity amount before five years if he/she gets disabled in an accident or a disease.

What is a Gratuity Calculator?

A Gratuity Calculator is an online tool designed to help employees estimate the amount of gratuity they will receive based on their tenure and last drawn salary. It eliminates the need of complex manual calculations and provides a clear picture of the amount the employee will receive after retirement.

How to Calculate Gratuity?

Gratuity can be calculated using the following formula:

Gratuity = (Last Drawn Salary × 15 × Number of Years of Service) / 26

• Last Drawn Salary includes basic salary and dearness allowance (if applicable).
• Number of Years of Service is rounded down to the nearest year if it includes a fraction.
• 26 represents the number of working days in a month.

For example, if an employee has a last drawn salary of ₹50,000 and has worked for 10 years and 7 months, the gratuity would be:

Gratuity = (50,000 × 15 × 10) / 26 = ₹288,462

Procedure to Withdraw Gratuity:

• Eligibility: Employees must have completed atleast 5 years of service
• Application: Employee can receive the Gratuity amount by submitting form 1 to the employer
• Approval: The employer approves and disburses the gratuity amount within 30 days

Benefits of a Gratuity Calculator

• Quick Estimation: The Calculator can be used to quickly calculate the accumulated gratuity just by entering a few inputs
• Financial Planning: Knowing the gratuity amount can help you plan your retirement corpus amount
• Accuracy: It helps in eliminating errors that could arise when manually calculated

What are the Taxation Rules for Gratuity Payment?

Gratuity payments are subject to taxation under Indian law. The taxability depends on whether the employee is covered under the Payment of Gratuity Act, 1972:

1. For Employees Covered Under the Act: The least of the following is exempt from tax:
   • ₹20 lakhs
   • Actual gratuity received
   • 15 days’ salary for each completed year of service
2. For Employees Not Covered Under the Act: The least of the following is exempt from tax:
   • ₹10 lakhs
   • Actual gratuity received
   • Half month’s salary for each completed year of service

How to Use a Gratuity Calculator?

• Enter your Last Drawn Salary: Input the sum of basic salary + dearness allowance
• Enter Years of Service: Specify the number of years you have worked continuously in the game
• Calculate: Hit the calculate button to get the final gratuity amount

FAQs for Gratuity Calculator:

1. Can the Gratuity Calculator be used for employees who have not completed to five years of service?

No, gratuity is only payable to employees who have completed a minimum of five years of continuous service.

2. Does the calculator account for changes in salary during the tenure?

No, the calculator just uses the last drawn salary as the parameter for calculation

3. Is the gratuity amount the same across all companies?

The formula for calculating remains the same. However, the returns may vary based on the last drawn salary

4. Is the Gratuity Amount taxable?

Gratuity amount is not taxable for government employees. Private employees can also get a Tax exemption on their gratuity amount upto 20 Lakhs. Any amount more than 20 Lakhs will be treated as ex-gratia payment

5. Does the Gratuity Calculator consider bonuses and allowances?

No, the calculator does not consider bonuses and performance allowances; it takes into account only basic salary and dearness allowance