Gratuity Calculator
Total Gratuity Amount = ₹ 0
Gratuity is a statutory benefit given to employees as a token of appreciation for their services to the organization. It is governed by the Payment of Gratuity Act, 1972. Gratuity is typically paid to employees who have completed at least five years of continuous service with an organization. However, in cases of the employee's death or disablement, the minimum five-year requirement is waived.
Key Points about Gratuity in India:
Eligibility: An employee becomes eligible for gratuity after completing five years of continuous service with an organization.
Payment Time: Gratuity is payable upon resignation, retirement, or death of the employee.
Tax Exemption: Gratuity received up to a certain limit is tax-exempt under Section 10(10) of the Income Tax Act.
Formula for Calculating Gratuity
For employees covered under the Act, the formula for calculating gratuity is:
Gratuity = (Last drawn salary x 15 x Number of years of service) / 26
Important Notes:
Maximum Limit: The maximum amount of gratuity payable as per the Act is ₹20 lakhs (as of 2024).
Partial Year Calculation: For partial years, if the service is more than six months, it is rounded off to the next full year. If it is less than six months, it is ignored.
Calculation for Non-Covered Employees: For employees not covered under the Act, the employer can have a different formula or method for calculating gratuity, usually specified in the employment contract.
Gratuity in Case of Death:
In the event of the death of an employee, gratuity is paid to the nominee or legal heir, and the amount is calculated based on the employee's last drawn salary and years of service, even if the employee has not completed the minimum five years of service.