Gratuity Calculator
Gratuity refers to the sum that employees in an organization obtain when they quit the company after five or more years of offering their services. It is usually the financial element a company presents to a worker in return for the assistance delivered. This sum generally helps the worker when they retire.
Furthermore, this sum is also given out to workers in case of their untimely demise, disability, or willing retirement due to health problems. Keep reading below to learn more about a gratuity calculator and how you can use it to calculate your gratuity amount.
- Total Gratuity Payable
- ₹ 34,859
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Gratuity refers to sum that employees in an organization obtain when they quit company after five or more years of offering their services. It is usually financial element a company presents to a worker in return for assistance delivered. This sum generally helps worker when they retire. gratuity calculator in India is a vital tool for employees to estimate their gratuity amount based on their years of service and last drawn salary.
Furthermore, this sum is also given out to workers in case of their untimely demise, disability, or willing retirement due to health problems. Keep reading below to learn more about a gratuity calculator and how you can use it to calculate your gratuity amount. Whether planning for future or nearing retirement, gratuity calculator in India helps in financial planning by providing precise gratuity amounts.
As name implies, a Gratuity calculator refers to an easy tool that helps you calculate gratuity sum an employee is eligible to get if they quit their job. Furthermore, a gratuity calculator is also one of most valuable tools if employees in an organization are planning to take voluntary retirement.
This gratuity calculator functions on a formula that employs several inputs that comprise last earned monthly salary, dearness allowance and number of years of service in workplace (including months). In addition, when you use an online gratuity calculator, you can seamlessly get exact gratuity sum in just one click.
Also, you must note that a gratuity calculator is free to use online that assists you in long-term economic planning for a worry-free retirement. Hence it might not be wrong to say that a gratuity calculator is a beneficial and easy-to-use online tool to effectively calculate gratuity amount paid or received if an employee has been serving in an organization for over 5 years without any service suspension.
Gratuity calculator online by 5paisa has been developed with a seamless, easy-to-use website interface. Therefore, it is quite effortless to use it to calculate your gratuity payment. Also, if you are new to this tool, here are some tips you can follow to calculate your gratuity payment:
Step 1: On 5paisa gratuity calculator online, enter last salary drawn (i.e. primary wage and dearness allowance).
Step 2: Next, fill total term or years of service with a company.
Step 3: Tap on 'Submit' button.
Step 4: 5paisa gratuity amount calculator will provide you with gratuity amount owed in seconds.
Step 5: You can follow same step to calculate your gratuity anytime by simply adjusting primary salary and number of service years in workplace.
Payment of Gratuity Act, 1972, defines regulations related to Gratuity amount calculation. In addition, Payment of Gratuity Act, 1972 categorises workers under two categories:
Category 1: Workers covered under Payment of Gratuity Act, 1972
Category 2: Workers not covered under Payment of Gratuity Act, 1972
above classifications apply to both government and private workers. Nevertheless, for employees in government sector, pay structure differs. Also, formula to calculate gratuity is simple and you can compute gratuity using formula below to get accurate calculation of gratuity on retirement:
Gratuity (G) = n*b*15/26
Here
n stands for number of completed years in current workplace
b stands for last drawn basic monthly wage (plus dearness allowance, commission obtained on sales, if any)
Note: Gratuity calculation takes into account number of working days in a month as 26 days and estimates wages at a rate of 15 days.
Below are gratuity calculation formulas for above-listed classifications.
Category 1: Workers covered under Payment of Gratuity Act
To compute gratuity for workers under this classification, formula is:
Gratuity (G) = n*b*15/26
This gratuity calculation formula is based on last paid wages of 15 days for every year of service ended or part of it overextending six months.
Category 2: Workers not covered under Payment of Gratuity Act
Workers associated with companies not covered under Payment of Gratuity Act are also qualified for gratuity payment. In addition, there is no limiting regulation that prevents an organization from paying gratuity to its workers even though company is not protected under Act. formula applicable for this classification is:
Gratuity (G) = n*b*15/30
sum of gratuity owed to worker is estimated based on half a month’s primary wage for each completed year. gratuity calculator in India follows guidelines set by Payment of Gratuity Act, ensuring accuracy in calculations.
Using gratuity calculator in India, employees can quickly determine their eligibility and exact amount they are entitled to receive upon retirement or resignation.
Upon fulfilling eligibility standards for Gratuity of:
Five years of work at present company
Age of superannuation
Holding no other full-time job
A person can perform gratuity amount calculation. Below are some advantages of using 5paisa gratuity calculator:
Defining correct gratuity worth
5paisa gratuity calculator helps you save time that you spend doing calculations manually
outcomes are quick, and calculator is accessible for free
You can readily use this gratuity calculator from any web or mobile device
You are entitled to gratuity sum specified under Payment of Gratuity Act of 1972 if you meet following requirements: -You are getting close to superannuation age.
-You have worked constantly over past five years in same organization.
-You don't work for another full-time company.
In these situations, an online gratuity calculator in India is helpful since it enables you to determine exact amount that is owed to you.
-It helps you save a lot of time and money.
-You can utilize it when lounging in your house.
-It supports your long-term budgetary planning.
Gratuity earned by a worker remains taxable according to Indian Income Tax Act under head ‘Income from Salary’. In addition, Income Tax department announced gratuity tax-exempt up to a specific extent that differs from non-government employees, government employees covered under Act, and non-government workers not covered under Act. So when using an employee gratuity calculator, you must consider this factor. gratuity calculator in India is a user-friendly tool that allows employees to stay updated on their gratuity benefits, making it easier to plan for their financial future. Below is an overview of tax exemption on gratuity:
For government workers, whole gratuity sum is entirely exempt from tax.
For non-government employees covered under Payment of Gratuity Act, highest tax exemption is least of following:
INR 20,00,000 is gratuity limit
15/26* previous drawn wages x a year of service or part thereof in excess of 6 months
Gratuity received
Gratuity is monetary benefit an employee receives from their company under provisions mentioned in Payment of Gratuity Act 1972. only pre-requisite to receiving a gratuity is that employee must have completed five years of service. It is given as a lump sum amount when an employee decides to leave company.
To receive gratuity amount, you have to make a request within thirty days of becoming eligible for gratuity. employer is liable to make payment within thirty days of receiving your request for gratuity. You can receive amount in cash, cheque or demand draft.
calculation of gratuity amount considers two aspects.
last drawn monthly salary or basic salary.
number of years spent in company.
In case of government employees, dearness allowance is added to basic salary for calculating amount. In some cases, commission earned on sales is also added.
Gratuity calculators help you in calculating amount to make informed investment decisions.
Earlier, gratuity was capped at INR 10 Lakhs. However, as per a new amendment, an employee can receive up to INR 20 Lakhs as gratuity upon resignation, retirement or death. This raised ceiling has been effective since March 2018. An employer can choose to pay more gratuity than ceiling.
In case of death of an employee, gratuity is calculated as per total number of years employee has spent in service with that employer.
Payable gratuity amount would be 2 * basic salary if employee spent less than one year in service.
Payable gratuity amount would be 6 * basic salary if employee served more than one year but less than five years.
Employer has to pay 12 * basic salary if employee worked for more than five but less than eleven years.
Employer has to pay 20 * basic salary if employee has spent more than eleven years but less than twenty years.
For a period of more than twenty years, payable gratuity is half amount of basic salary for every six months completed in organization. However, there is a cap of 33 times basic salary.
As gratuity is received in lumpsum, you can invest this amount wisely to earn high returns. It is inadvisable to let amount sit idly in your savings account. As bank rates have dipped drastically and inflation is high, your returns can run negative.
Here are some options you can explore to invest your gratuity amount.
Fixed Deposits - Fixed deposits are one of safest investment instruments to earn interest from your gratuity amount. Traditionally, Indians have preferred to invest their money in fixed deposits compared to other instruments due to their low-risk nature.
These days you can get returns in range of 3-5.5%. You can get higher returns if you invest for a longer time. In case of senior citizens, returns can be higher by a few points. You can use any online calculator to understand returns if you are considering this option to invest your gratuity amount.
Debt Funds - If you are looking for higher returns but still prefer a safer option, you can check out debt mutual funds. These funds invest your money into debt instruments like government bonds, corporate bonds and other money market instruments. However, you will have to pay tax on your earnings. Short Term Capital Gains Tax becomes valid if you exit your debt fund before three years. For a tenure longer than three years, you will have to pay Long Term Capital Gains Tax.
In this case, bond issuers share a pre-decided interest. So, you will always know returns beforehand. It is advisable to research instruments before investing to make an informed decision.
Senior Citizens Savings Scheme (SCSS) - This is a government scheme specially formulated for senior citizens by government of India. It can help you earn reasonable interest and receive quarterly interest payments. maturity period of this scheme is five years. However, you can extend it to eight years.
You can open this account at either a bank or a post office. You also get option to have it jointly with your spouse. Under this scheme, you can open multiple accounts, but total amount of investment cannot exceed INR 15 lakhs.
SCSS also gives you benefit of income tax deductions as per Section 80C of Income Tax Act.
Equity Mutual Funds - If you have a higher risk tolerance, you can consider equity mutual funds or hybrid mutual funds. However, it is recommended to study past performance of funds before investing. It will help align your goals with your financial decision.
All in all, an online gratuity calculator has made gratuity calculation a seamless task. Nevertheless, as calculations depend on several factors such as job term or basic salary, you must consider all these aspects for better calculation.
Frequently Asked Questions
To become eligible for applying gratuity, you need to complete five full and consecutive years with an employer. However, this criteria does not hold if an employee suffers disability, sickness, or death. It means they become eligible for gratuity even when they have not completed five years of service with their current employer.
In case of the death of the employee, the legal heir or the nominee can receive the gratuity benefit.
This is a debatable issue. As per a High Court decision, an employee who has completed 240 working days in the 5th year becomes entitled to receive gratuity. However, it also depends upon the rules set by your employer.
The employer is liable to pay gratuity in any of these circumstances.
On superannuation or retirement of the employee.
Discontinuation of the employment contract either through resignation or termination.
Disability, sickness or death of the employee.
Retrenchment or layoff.
When an employee enlists for the VRS or Voluntary Retirement Scheme.
For calculating the gratuity amount, service of more than six months is considered one year. It means you should have completed one day over and beyond six months to receive a gratuity for that year. However, remember that you still need to have completed five years of service.
Yes, contractual and temporary employees are eligible for gratuity as long as the company considers them employees. However, an apprentice is not qualified to apply for gratuity.
No, it does not matter whether your employer has a five-day or six-day working week, the formula for the calculation of gratuity remains the same.
There are a few scenarios in which the employer can refuse to give the gratuity. These instances include:
1. When the employee’s services have destroyed the property of the employer.
2. The employee was violent or disorderly within the premises of the employer.
3. The employee has been involved in an offense involving moral turpitude.
You may want to note that the employer is liable to pay the gratuity even if they have suffered financial losses. The above-mentioned clauses are the only situations when the employer can refuse to pay gratuity.
The gratuity received by government employees is exempted from tax.
Private employees eligible to receive gratuity on retirement can get a tax exemption. The least of the following are exempt from tax:
- The statutory limit of INR 20 Lakhs. (Maximum limit / Govt notified amount)
- Last drawn salary * 15/26 * No. of completed years of service.
- Actual Gratuity received.
Disclaimer: The calculator available on the 5paisa website is intended for informational purposes only and is designed to assist you in estimating potential investments. However, it is important to understand that this calculator should not be the sole basis for creating or implementing any investment strategy. View More..