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Are you a salaried employee who may be retiring soon? In that case, you need to know the amount of gratuity that your employer may be paying you when you retire. This will help you plan how to Read more... use those funds optimally. With the Bajaj Broking gratuity calculator, you can easily determine the total gratuity payment you may receive at retirement. Read less
Gratuity is a one-time payment an employer makes to an employee as a thank-you for their long-term service to the company. The Payment of Gratuity Act, 1972, governs gratuity in India and provides employees with a lump-sum payment upon retirement, resignation, or termination.
A Gratuity Calculator is an online tool that helps employees estimate the gratuity amount they are eligible to receive when leaving a job. By entering basic details, such as salary and total years of service, the calculator provides an instant and accurate estimate.
The Payment of Gratuity Act, 1972 stipulates that gratuity is calculated based on the employer's coverage.
The formula for employees covered under the Act is:
Gratuity = (15 × Last Drawn Salary × Number of Completed Years of Service) / 26. Here, the salary includes basic pay plus dearness allowance.
For example, if an employee has a last drawn salary of ₹60,000 and has completed 15 years of service, the equation reads:
Gratuity = (15 × 60,000 × 15) / 26 = ₹5,19,231
For employees not covered under the Act, the formula slightly differs:
Gratuity = (15 × Last Drawn Salary × Number of Completed Years of Service) / 30.
The maximum gratuity payable under the Act is currently ₹20 lakhs, as per government regulations.
For example, if you take the same variables, the gratuity for an employee not covered under the Act will be:
Gratuity = (15 × 60,000 × 15) / 30 Or, ₹4,50,000
To utilise a Gratuity Calculator, you must provide a few essential details.
Last Drawn Salary: This includes your Basic Pay and Dearness Allowance (DA). It generally excludes HRA, special allowances, and bonuses.
For Covered Employees: Any period over 6 months is considered a full year.
For Non-Covered Employees: Only completed years are calculated; fractions of a year are ignored.
Calculating gratuity manually can lead to errors due to the specific rounding rules and days-per-month ratios. A digital tool offers several advantages. Here is why you should use Gratuity Calculator:
You can easily calculate your gratuity amount online in just a few steps. Using the Gratuity Calculator is simple.
You'll instantly see your estimated gratuity amount. This helps you understand what you're entitled to receive when leaving your job, retiring, or changing employers.
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A gratuity calculator uses only two components to calculate the gratuity amount — the salary (i.e. basic pay plus dearness allowance) and the number of years of service.
The gratuity calculator indirectly accounts for partial years of service. This is because the user needs to factor in the partial service period and input the number of years of service accurately. For example, if you have worked for more than 6 months in the last year of service, the period will be rounded up to the next full year. This means if you worked for 10 years and 8 months, the service period will be considered as 11 years.
No, the gratuity calculator is specifically used for estimating the amount of gratuity payable to an employee. It is not a tax calculator.
No, this online tool can be used for the calculation of gratuity for private employees and government employees.
An employee should have completed a minimum of 5 years of continuous service with an employer to be eligible for gratuity payments.
No, the gratuity amount is considered a part of an employee’s cost-to-company (CTC). So, it is not deducted from the CTC.
Gratuity is calculated on your last drawn salary, which means your basic pay and dearness allowance (DA) are considered. Other types of allowance, such as HRA and bonus, are not included in gratuity calculations. The formula is “Last Drawn Salary × Years of Service × 15/26” (for covered employers) or “15/30” (for non-covered employers).
The gratuity is due when you complete the conditions to be eligible. The employer will then decide when the gratuity is to be paid: during your time of termination, or after five years.
No, the gratuity calculator only uses your basic salary and dearness allowance (DA) to calculate gratuity. It does not include house rent allowance (HRA), bonus or any other variable allowances in the gratuity calculation.
Yes, you can enter the number of years, as long as it is fewer than 5. However, an employee must have five full years of continuous service to qualify for a statutory gratuity under the Payment of Gratuity Act.
The gratuity calculator will allow users to enter a salary and number of years of service, regardless of the employee's status (contractual/part-time). An employee shall be covered under the Act based on whether the employer was covered by the statute (10 or more employees) and whether it issues a multiplier determined by law (15/26 or 15/30). There is no implied difference in the gratuity calculation based on status, although eligibility for the contract or for part-time employment may be determined by law.
If an employee dies while rendering service, the calculator's years-of-service logic will apply (i.e., service may be rounded up if the last year of service is over 6 months). The page states that dying while in service automatically makes you (or your nominee) eligible under the gratuity rules.
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