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Gratuity Calculator - Best Tool For Gratuity Calculation
Are you not sure of how much gratuity amount you will receive when you will be leaving your current organization? If so, then use the gratuity calculator to find out the amount of gratuity that you can be entitled to. If you are not sure how to use the gratuity calculator in India then this article is going to be your guide for the same.
What is Gratuity?
Human capital is the lifeblood of any organization that values their esteemed workforce, while doing so it also experience remarkable growth. As a token of appreciation for their dedicated service, organizations provide a gratuity to the employees who serve for a specific period of time. This gesture not only acknowledges their contributions, but also serves as a testament to the organization's commitment to its workforce.
Gratuity is governed by the Payment of Gratuity Act, of 1972 and it is payable when an employee serves a company for five years at a stretch or more. However, in case of any accident or disease, gratuity may be paid before the completion of five years as well.
It is a lump sum amount given to the employee and it is calculated based on the last drawn salary of the employee. We will be discussing how gratuity is calculated in detail in the subsequent part of this article.
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What are the Eligibility Criteria for Payment of Gratuity?
An employee will be entitled to receive Gratuity only if he or she fulfils these criteria –
- You need to serve the organization for at least five year
- You have to be eligible for superannuation
- If you are retiring from the organization
- Finally, in case of the death of the employee, the gratuity amount will be paid to the nominee.
What is a Gratuity Calculator?
Now that you know what is gratuity, let’s understand how you can calculate it with the gratuity calculator. It is an online calculator for calculating the amount of gratuity that you can get on leaving an organization.
The retirement gratuity calculator needs some input from the users like the number of years served in an organization, the last drawn salary and then provide the gratuity amount that you will be entitled to receive.
Gratuity calculator makes the calculation of gratuity easier for employees at any given point in time.
Gratuity Calculation – What is the Formula for Calculating the Gratuity?
The gratuity calculation is pretty interesting and it depends on different gratuity formulas depending on the scenario. So, if the organisation comes under the purview of the Payment of Gratuity Act, of 1972, then the formulae that have to be used are –
Gratuity amount = n * b * (15/26)Here,
- N
the number of years served in the organisation
- B
last salary drawn which includes basic salary plus dearness allowance.
For instance, if you have served ABC Company for 10 years and your last drawn basic salary per month was Rs. 1 lakh and the dearness allowance you used to get is Rs. 50000. So, the gratuity amount you will be entitled to be –
Gratuity amount = 10 * 150000 *(15/26)
= Rs. 865384.62
Now if you work in an organisation which is not under the purview of the Gratuity Act, but pays a gratuity to the employees, then the formula in use will be –
Gratuity amount = n *b * (15/30)Here,
- N
the number of years served in the organisation
- B
last salary drawn which includes basic salary plus dearness allowance.
As you can see, the one change in the formula is in the constant 15/30 which was earlier 15/26.
So, taking a cue from the above example, in this organisation your gratuity amount will be
= 10*150000*(15/30)
= Rs. 750000.
If you are wondering what is these 15/26 or 15/30, then here is the explanation for the same –
In the gratuity formulae, 15 refers to 15 days of each month, and 26 or 30 is the total working day in a month. So, gratuity is the amount calculated for fifteen days of a month in a year and then it is multiplied by the number of years worked. So, you get the amount for extra fifteen days in a year for the number of years you have served the company.
How to Use the Gratuity Calculator?
The use of the gratuity calculator is pretty simple. You just need to enter your last drawn salary of yours, the basic salary plus dearness allowance, if it is there. Then enter the period for which you have served the company. As you can see in the gratuity calculator above if you enter a certain number of years and months less than 6 then it will calculate the gratuity for the number of years entered, if the number of months is more than 6, then the gratuity calculator online will take rounded of year to the next number of year. For instance, if you enter 6.5 years, the gratuity will be calculated for 7 years, and if it is 6 years or 2 months, then it will be calculated for 6 years.
Now once you enter the variables, the retirement gratuity calculator will give you the gratuity amount instantly and it will change as soon as the variables are altered.
Benefits of Using the Gratuity Calculator
The benefits of using a gratuity calculator are –
It helps you plan for your retirement. Gratuity calculator in India can be a crucial tool for people as it can help people who are planning their retirement and want to know how much they are going to get as gratuity when they will retire.
It will save you time as mannual calculation of gratuity can be time consuming and there can be chances of human errors as well.
You can compare gratuity for different periods and different salaries which can help you choose jobs wisely as well and also decide on how long you should be serving the organisation.
You do not have to manually calculate the number of years, once you enter the joining date, you will get the total number of years served in the organisation.
What are the Taxation Rules for Gratuity?
Gratuity plays an important role in securing your financial future especially when you are retired. While this lump sum amount can help you fulfil certain financial goals of yours upon retirement or leaving the organisation, you also need to be aware of the tax implications that are associated with the gratuity.
- If you are a government employee, whether state or central or even municipal employee, the gratuity amount you receive will be entirely tax exempted.
- If you are an employee of any private organisation and the employer comes under the purview of the Payment of Gratuity Act, 1972, then the least of the following amount that you may receive will be exempted from tax –
- Rs. 20 lakhs
- The actual amount of gratuity received
- Gratuity amount you are eligible for
For instance, if you are eligible for Rs. 5 lakhs of gratuity and your employer pays Rs. 8 lakhs of Gratuity for exceptional performance or any other professional reasons, and then there is the government upper ceiling of Rs. 20 lakhs on Gratuity payment, then the least of these three amounts is Rs. 5 lakhs which will be exempted from tax and the Rs. 3 lakhs which you receive in excess will be taxable.
Conclusion
Whether you are planning for retirement, thinking of changing your company or joining a company, make sure, you are aware of the gratuity amount that you will be entitled to or at least a rough estimation. This will not only help you in your retirement planning, or choosing a job but also help you in achieving certain financial goals.
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FAQs on Gratuity Calculator
Can I get a gratuity if I have worked for 4 years and 7 months in an organisation?
No, you need to complete at least five years of service in an organisation to be eligible for gratuity payment from that organisation until and unless you had to leave for any accident or terminal illness.
Can I use the gratuity calculator without paying any charges?
Yes, the Bharti AXA Gratuity Calculator is completely free of cost. You can use it anytime and any number of times without paying any charges.
I have been working for 6 years as a vendor of XYZ Company, am I eligible for gratuity payment?
No, only employees are eligible for gratuity payment, if you are not on the payroll of the company, you are not an employee and thus you are not eligible for gratuity.
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