Gratuity Formula

Looking For a Loan?

I have read the Privacy Policy & Agree to Terms & Conditions and authorize Dialabank & its partner institutions to Call or SMS me with reference to my application.

Why Apply with Dialabank?

Compare across 18 Banks
Get Money in 30 Mins
Loan Amount Up to 5 Crore
Hassle-free Disbursal
Unbiased Experts Advice

What do you mean by the Gratuity?

Gratuity is the financial amount that will be payable to the employee of an organization underneath the Pay of Gratuity Act 1972. This is usually paid towards the staff as a keepsake of appreciation for their services towards the company. Gratuity repayment considers several components that define the gross wage associated with workers.

The staff’s gratuity happens to be acquired before five years if they get disabled in an accident or due to any disease. Therefore, gratuity is largely dependent on your personal net income.

Gratuity formula

How can you Calculate Gratuity?

The quantity of gratuity for staff is protected under the Payment of Gratuity Act 1972. Gratuity is measured utilizing the Gratuity formula:

Gratuity = n*b*15 / 26

where n = Tenure of service completed in the organization
b = Final pulled basic salary + dearness allowance

For instance, you have been working with the XYZ organization for a period of fifteen years. Your previous basic salary along with dearness allowance ended up being Rs 30,000. Therefore:

The actual amount of gratuity = 15 * 30,000 * 15 / 26 = Rs 2,59,615

Gratuity should mention two things:

  • According to the Gratuity function, the actual gratuity amount can’t be more than Rs 20 lakh. Any excesses would be managed as ex-gratia.
  • If the number of years an employee has proved helpful within the last year of work is more than six months. For example, assume the tenure of service is actually 16 years 7 months, then you will definitely receive the gratuity for 17 years. Otherwise, for 16 years 4 months, it will be 16 years.

The gratuity amount for staff not protected underneath the Gratuity operation will be determined depending on the half-month salary of each 12 months of service.
The method is: (15 * Your final pulled salary * the working tenure) / 30.

For example, you have a basic wage of Rs 30, along with a constant service of 7 years not covered under the Gratuity operation.

Gratuity Amount = (15 * 30,000 * 7) / 30 = Rs 1,05,000.

How Does the Gratuity Calculator Work?

Go through and follow these ways and measure your own gratuity utilizing the Gratuity Calculator:

  • If relevant, you have to enter your basic salary and the dearness allowance.
  • Now enter the period of time of solution aided by the company.
  • The gratuity calculator would gauge the total gratuity volume payable to you personally in few seconds.
  • You can easily recalculate the gratuity anytime by changing the insight sliders.
  • The gratuity will likely be computed immediately whenever you shift the sliders.

What are the benefits of using the Gratuity Calculator?

  • The Gratuity Calculator is user-friendly.
  • The gratuity calculator explains the gratuity statistics in seconds. In addition, it helps you plan your finances by spending the gratuity in a clever way for an optimal return.
  • You can use the gratuity calculator from the absolute comfort of your home or almost any place to obtain the gratuity volume.

Rules for Gratuity Calculator

  • The total amount of gratuity obtained by any government staff member (whether central/state/local authority) is actually excused from the income tax.
  • Any other private staff who is qualified for Gratuity will receive tax-exempt on at least one of the three amounts mentioned below:
  1. Rs 20 lakh.
  2. The particular amount of gratuity received.
  3. The qualified gratuity.

For example, suppose your company gave you a gratuity of Rs 12 lakh. According to the gratuity estimated in the example, you are eligible for a gratuity of Rs 2,59,615. The government has established a tax-free maximum of Rs 20 lakh. The smallest of the three amounts is Rs 2,59,615 which is tax-free. You must pay tax on the remaining sum of Rs 9,40,385 based on your tax bracket.

FAQ’s on Gratuity Calculator

How is gratuity determined as a percentage?

An employee may earn a maximum gratuity of 57.69% of their monthly payments. You may use the Gratuity Calculator to determine the precise amount of gratuity.

✅What is the calculation of gratuities for employees who are paid every month?

To calculate the employee’s per day salary, divide the monthly income (last drew Basic + Dearness Allowance) by 26 and multiply the result by 15 x the number of years of service; i.e., Gratuity = (Basic + DA) x 15/26 x number of years.

What is the new gratuity rule?

A month of employment is calculated as 26 days for gratuity purposes. As a result, the 15-day salary is computed as (monthly salary x 15)/26. The gratuity amount is calculated by multiplying this figure by the number of years of service. Thus, as the basic salary rises, so will the payment of gratuity.