Gratuity Calculator
Calculate Your Gratuity Amount
What is Gratuity?
Gratuity is a lump sum benefit provided by an employer to an employee as a token of appreciation for their services. It is typically paid out when an employee retires or resigns after a minimum of five years of continuous service with the same employer. The Payment of Gratuity Act, 1972 governs the calculation and payment of gratuity in India.
How Does the Gratuity Calculator Work?
The Gratuity Calculator helps you estimate the gratuity amount you are entitled to based on the following parameters:
- Last Drawn Salary: The last monthly salary you received before retirement or resignation. This typically includes basic salary, dearness allowance, and any commissions earned on sales.
- Years of Service: The total number of years you have worked with your employer.
The calculator uses the following formula to estimate the gratuity amount:
Gratuity = (Last Drawn Salary × Years of Service × 15) / 26
Where 15 represents the number of days for which gratuity is paid per year of service, and 26 represents the average number of working days in a month.
Benefits of Gratuity
- Financial Security: Gratuity provides a lump sum payment that can be used to support your financial needs after retirement or during a career transition.
- Employee Loyalty: Gratuity acts as a reward for long-term employees, encouraging loyalty and long-term commitment to the organization.
- Tax Benefits: Gratuity received is exempt from tax up to a certain limit as per the Income Tax Act, making it a tax-efficient benefit.
Frequently Asked Questions (FAQ)
1. Who is eligible for gratuity?
Employees who have completed at least five years of continuous service with the same employer are eligible for gratuity. However, in cases of death or disability, the minimum service period is not required.
2. How is the gratuity amount calculated?
The gratuity amount is calculated using the formula (Last Drawn Salary × Years of Service × 15) / 26. The last drawn salary includes basic salary, dearness allowance, and any commissions earned on sales.
3. Is gratuity taxable?
Gratuity received by an employee is exempt from tax up to a certain limit as specified under Section 10(10) of the Income Tax Act. Any amount received beyond this limit is taxable as per the individual's income tax slab.
4. Can I receive gratuity if I resign before completing five years of service?
No, gratuity is only payable if you have completed at least five years of continuous service with the same employer, except in cases of death or disability.