Gratuity Calculator

Gratuity Calculator India

An employee employed by a private organization offering EPF benefits is entitled to receive gratuity upon completing five years of service. However, in the event of the employee's death or disability, the gratuity is payable even if the individual has not completed the five-year service requirement.

A gratuity calculator simplifies the process of determining the gratuity amount an employee is entitled to by requiring two key inputs: the most recent salary and the total years of service.

What is Gratuity?

Gratuity is a lump sum amount paid by an employer to an employee as a gesture of appreciation for their dedicated service and contributions to the organization. Employees who have completed a minimum of five years of continuous service with a company are generally eligible for gratuity.

However, an employee may qualify for gratuity even if they have not completed five years of service, provided they are disabled due to illness or an accident. The payment of gratuity is governed by the Payment of Gratuity Act, 1972, and the amount is primarily determined based on the employee's total years of service and the last drawn salary.

What is a Gratuity Calculator?

A gratuity calculator is an online financial tool designed to help individuals determine the gratuity amount they are entitled to receive upon completing their employment. By calculating the estimated gratuity, this tool assists in effective financial planning, including retirement strategies and other major financial goals.

Using a gratuity calculator eliminates the need for manual calculations, providing an accurate result in a matter of seconds. To use the tool, you simply need to input your current salary (including basic pay and Dearness Allowance) and the number of years of service.

Gratuity Calculation Formula with Example

Gratuity calculation is based on two key factors: the number of years of service with your current employer and your last drawn salary. The online gratuity calculator applies a straightforward mathematical formula to determine the amount you are entitled to receive.

However, before diving into the formula, it is important to understand that employers who provide gratuity can be classified into two categories: those governed by the Gratuity Act and those not covered by the Act. The gratuity calculation formula differs depending on the employer's category.

For employers covered under the Gratuity Act (i.e., organizations with 10 or more employees), the formula for gratuity calculation is as follows:

Gratuity = 15 x last drawn salary x working tenure / 26

Please note that the gratuity calculator provides results only for employers covered by the Gratuity Act.

The formula to calculate gratuity (Not under the Gratuity Act) is:

Gratuity = 15 x last drawn salary x working tenure / 30

Let us understand the two different formulas with the help of examples:

1. Gratuity Calculation: For Employers Covered under the Payment of Gratuity Act, 1972

The gratuity calculation for Mr. ABC, whose last drawn salary (including Dearness Allowance) is Rs. 1.5 lakh and has completed 8 years of service, is as follows:

Gratuity = 15 x 8 x 1,50,000 /26 = Rs. 6,92,308

2. Gratuity Calculation: For Employers Not Covered under the Payment of Gratuity Act, 1972

In the case of Mr. XYZ, where the last drawn salary, including Dearness Allowance (DA), is Rs. 2 lakh, and the total years of service amount to 10 years, the calculation will be as follows:

Gratuity = 15 x 10 x 2,00,000 /30 = Rs. 10,00,000

How to Use the BlinkX Gratuity Calculator?

Below is a step-by-step guide for using the BlinkX Gratuity Calculator:

• Begin by navigating to the BlinkX Gratuity Calculator tool.
• Use the slider to input your basic salary and dearness allowance (DA).
• Enter the total number of years you have worked with your current employer.
• The calculator will instantly generate the gratuity amount based on the details provided.
• You can modify the salary and service years using the slider to explore various scenarios and plan your financial goals effectively.

What are the Benefits of Using a Gratuity Calculator?

Using an online gratuity calculator offers several key advantages:

Data Security: It ensures the secure handling of personal and financial information.

Convenience and Simplicity: The tool provides a straightforward and efficient method for estimating gratuity, saving time and effort.

Accuracy: By automating the calculation process, it eliminates the potential for manual errors, ensuring reliable and precise results.

What Are the Taxation Rules for Gratuity?

The taxation rules for gratuity are determined by the type of employee as follows:

Government Employees: Gratuity received by government employees, including those employed by state, central, or local authorities, is fully exempt from tax.

Private Sector Employees: For employees working in the private sector, where the employer is covered under the applicable legislation, the gratuity is exempt from tax to the extent of the least of the following three amounts:

- Rs. 20 lakh.

- Eligible amount of gratuity.

- Amount of gratuity received.

These rules ensure that the tax exemption is applied according to the employee's classification and the employer's coverage under the relevant law.

How Can a Gratuity Calculator Help You?

A gratuity calculator offers several key benefits:

• It accurately determines the amount owed to you.
• It saves valuable time and resources by automating the calculation process.
• It is easily accessible from the comfort of your home at no cost.
• It supports effective long-term financial planning.

What Are the Eligibility Criteria for Payment of Gratuity?

The following criteria must be met to qualify for a gratuity payment:

• The employee must be eligible for superannuation benefits.
• The employee must have retired from employment.
• Resignation is also applicable, provided the employee has maintained continuous employment with the same employer for at least five years.
• In the event of the employee's death, the gratuity is disbursed to the designated nominee, or, in case of disability due to illness or accident, to the employee.