Know Your Gratuity: Rs 41,000 as last-drawn basic salary and 6 years and 8 months of service; what will be gratuity?
Gratuity Calculator: Employees working in a company following the Payment of Gratuity Act, 1972, become eligible to get gratuity if they complete 5 years of uninterrupted service. Their last drawn basic salary and years of service are taken into account when calculating the gratuity amount. The eligible employee can get it at the time of leaving the organisation, among other circumstances.
Gratuity Calculator: The Payment of Gratuity Act, 1972, makes gratuity applicable to the employees with uninterrupted 5 years of service in the organisations following the act. The companies that once became the followers of Act are mandated by the law to provide gratuity to their eligible employees forever. The maximum gratuity one can get is Rs 25 lakh. The gratuity amount also provides tax benefits up to a certain limit. A person's last-drawn basic salary and dearness allownace (DA) and the years of service are two important factors to calculate the gratuity amount.
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(Disclaimer: Our calculations are projections. Actual calculations may vary slightly.)
Which organisations need to pay gratuity to their employees?
As per the Payment of Gratuity Act, employees working in a mine, factory, oilfield, port, railway company, shop, plantation, or establishment where 10 or more persons are employed or were employed on any day of the last 12 months are eligible to get gratuity.
Which organisations need to pay gratuity to their employees?
Other than that, employees working in establishments or classes of establishments where 10 or more employees are employed, or were employed, on any day of the preceding 12 months, as per the Central Government specification, are also eligible for gratuity.
When can an employee get gratuity?
An employee can get gratuity at the time of their resignation, termination, disablement, superannuation, or retirement. If the eligible person dies, their family members receive gratuity.
What is maximum gratuity a person can get?
The maximum limit of retirement gratuity and death gratuity under the Central Civil Services (Pension) Rules 2021 is Rs 25 lakh. It was revised from the earlier maximum limit of Rs 20 lakh to the current limit on January 1, 2024.
Is gratuity amount tax-exempt?
Under Section 10(10) of the Income Tax Act, 1961, the gratuity amount is tax-exempt up to Rs 20 lakh. The earlier limit was Rs 10 lakh. The revised limit applies to employees in the event of retirement, resignation, death, or disablement on or after March 29, 2018.
Can an apprentice also get gratuity?
No, gratuity is granted only to a full-time employee.
How service years are counted for gratuity?
One needs to complete 5 continuous years of service. After that, a minimum six-month period is calculated as a full year.
Examples of service years
E.g., if someone has completed 6 years and 8 months of service, it will be calculated as 7 years, but if someone has completed 8 years and 5 months of service, it will be counted as 8 years.
How is gratuity calculated?
The number of years of service and the last-drawn basic salary and dearness allowance (DA) are taken into account to calculate gratuity.
Gratuity calculation formula
Gratuity = (Last Drawn Salary x Number of Years of Service) X 15/26
Here, the number 15 refers to 15 days’ wages per year, which is the gratuity payable.
26 refers to 30 days in a month excluding Sundays.
Rs 41,000 as last-drawn basic salary and 6 years and 8 months of service
The number of years here will be 7 years.
So, the estimated gratuity amount will be Rs 1,65,577.