Gratuity calculation formula, method online 2019: This is how it is done in CTC, see example through chart - All you need to know

Gratuity calculation formula: People who have completed at least five years of service in any company and are planning to change the organization or are about to retire from their jobs are entitled to gratuity. This is an important part of the salary structure of any employee and ultimately, goes to provide a big lump sum amount in their hands.

Gratuity is the money that is paid by an employer to his employee in return for his services. It is governed by the Payment of Gratuity Act 1972. The Gratuity Act caps the amount of gratuity at Rs 10 lakh. You need to complete at least five years of service in any organization to lay your claims on it.

While companies are expected to give gratuity dues to employees in a fair and just manner, it is better to know what you are entitled to so that no clerical or administrative error leads you to get a lesser amount? Zee Business will teach you to calculate your Gratuity amount.

Gratuity Calculation Formula
Gratuity = n*b*15/26

Here, 'n' is the tenure of service completed in the company and 'b' is the last drawn basic salary + dearness allowance

To make it easy for you, we explain it to you through an example.

Imagine that you worked with XYZ company for a period of 10 years. Your last drawn basic salary along with dearness allowance was Rs 40000. The amount of gratuity = 10*40000*15/26 = Rs 230,769.23

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Note that the time period of service is rounded-off for gratuity calculation. If the last few months in the last year of employment are more than 6 months, then it will be rounded to the next number. For eg. 10 years and 8 months will become 11 years. Up to five months the same year will be counted. For example, if the period of service is 10 years and 4 months, it will be treated as 10 years.