Online Gratuity Calculator for India
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5 Years
What is Gratuity?
Gratuity is a sum of the amount that employers pay their employees as a sign of gratitude for the service they have performed over the years. Gratuity is payable under the Payment of Gratuity Act, 1972.
This Online Gratuity Calculator help you calculates the sum of the amount that employers pay to their employees when they complete service for 5 or more years.
Gratuity is paid to employees who have completed five or more years of service in their respective companies. The basis for the calculation of gratuity is the last drawn salary and year of service provided by the employee.
If a company, be it public or private sector has 10 or more than 10 employees working in their organization, must pay gratuity to its employees. The Act provides for payment of gratuity at the rate of 15 days wages for each completed year of service subject to a maximum of Rs. ten lacs. In the case of seasonal establishment, gratuity is payable at the rate of seven days wages for each season.
What is Calculation formulas for Gratuity Calculation?
Gratuity is calculated differently for employees covered under the Payment of Gratuity Act, 1972, and for those not covered under the Act.
1. For employees covered under the Act, the formula for calculating gratuity is:
Gratuity = (Last drawn salary x 15 days x Number of years of service) / 26
Here, the last drawn salary includes basic salary and dearness allowance. The number of years of service is rounded off to the nearest full year. For example, if an employee has worked for 7 years and 8 months, it will be considered as 8 years of service.
2. For employees not covered under the Act, the formula for calculating gratuity is:
Gratuity = (Last drawn salary x 15 days x Number of years of service) / 30
Here also, the last drawn salary includes basic salary and dearness allowance. The number of years of service is rounded off to the nearest full year.
Common and frequently asked questions that employees might have regarding gratuity along with their answers are:
- Is it mandatory for an individual to serve five years of continuous service for gratuity?
Yes, it is mandatory for an individual to serve five years of continuous service in a company to be eligible for gratuity.
- How much time does the employer take to release the gratuity amount?
The employer is required to pay the gratuity amount within 30 days from the date it becomes payable. If the amount is not paid within this time, simple interest will be paid from the date on which the gratuity becomes payable.
- Who can receive gratuity benefits?
Gratuity benefits can be received by an employee who has completed five years of continuous service in a company. In case of death or disablement of an employee, the gratuity amount will be paid to the nominee or legal heir.
- How much is the tax on gratuity?
Gratuity received by government employees is fully exempt from tax. For non-government employees covered under the Payment of Gratuity Act, 1972, the least of the following is exempt from tax: Rs 20 lakh; last drawn salary x 15/26 x years of service; actual gratuity received.
- How to nominate someone to receive my gratuity in case of my death?
An employee can nominate one or more family members to receive the gratuity amount in case of their death by filling out Form F and submitting it to their employer.
- Can gratuity be paid before retirement?
Yes, gratuity can be paid before retirement in certain conditions such as when an employee resigns after completing 5 years of service in a company or if an employee dies while in service, the gratuity amount will be paid to the nominee or legal heir.
Gratuity act references and official websites
Payment of gratuity act | Chief Labour Commissioner
https://clc.gov.in/clc/acts-rules/payment-gratuity-act
https://clc.gov.in/clc/sites/default/files/PaymentofGratuityAct.pdf
Ministry of Labour & Employment, Government of India
https://labour.gov.in/sites/default/files/the_payment_of_gratuity_act1972.pdf
