Gratuity Calculator

The Gratuity Calculator utilizes a formula to estimate the gratuity amount you can receive, typically after completing five years of service in your current company. Private company employees eligible for Employee Provident Fund (EPF) benefits become eligible for gratuity after this period. In certain cases, such as incapacitation due to illness or accidents, employees may qualify for gratuity before five years. Our online gratuity calculator can help determine the gratuity amount you're entitled to. These calculations adhere to the regulations outlined in the Payment of Gratuity Act of 1972, factoring in your last drawn salary and the duration of your corporate service.

What is gratuity?

According to the Payment of Gratuity Act of 1972, a company's employee may receive a monetary gratuity. This is mostly given to the worker as a sign of gratitude for his or her services to the business. One of the many elements that make up the employee's total income is the gratuity payout. Gratuity is a cash benefit provided by an employer to the employee for the services rendered to the organisation. The employee is paid at retirement, resignation, layoff, or termination, provided the employee has completed five years of continuous services before leaving the organisation. In some instances, such as the individual's death, continuous 5-year service is relaxed.

You can use the gratuity calculator to estimate the amount of money you will receive if you plan to leave the job. This will be given after a minimum of five years of service.

Here's the gratuity formula:

(15 x your last drawn salary x tenure of working) / 26

What are the eligibility criteria for receiving gratuity?

The Payment of Gratuity Act of 1972 is applicable to all establishments or organisations employing 10 or more employees. Employers who wish to provide gratuity benefits to their employees can choose to adopt the provisions of the Payment of Gratuity Act of 1972, and therefore, become liable to pay gratuity to eligible employees.

The following conditions must be met for the employee to earn a gratuity:

• The employee must be qualified for retirement benefits.
• The worker ought to have retired.
• The employee must have left their position after five years with the same company.
• The employee must have passed away or become disabled as a result of an illness or accident.

Gratuity calculation formula

The gratuity rules and calculations are prescribed by the Payment of Gratuity Act of 1972.

There are mainly two categories, as given below.

• Category 1: Employees covered under the Act
• Category 2: Employees not covered under the Act

Category 1: Employees covered under the Act

Using the two critical parameters – number of years of service and last salary drawn, you can calculate the gratuity as follows:

The Gratuity calculation formula that you can use to calculate the Gratuity amount is:

Gratuity = Last drawn salary x (15/26) x Number of years of service

Here:

• The number of working days per month is taken as 26 days.
• The gratuity calculation is accounted at the rate of 15 days wages.

The last drawn salary should be calculated to account for the following components:

• Basic
• Dearness Allowance – for government employees
• The commission received on sales

Example: If you had been drawing Rs. 80,000 as your last basic salary with 10 years four months of employment tenure, then the gratuity amount you will receive as per the formula is:

Gratuity = Rs. 80,000 x (15/26) x 10 = Rs. 4.62 lakh

The four months are below 5, so it is rounded off to 10. Months more than five are rounded off to the following year.

Category 2: Employees not covered under the Act

You can be paid a gratuity even if the organisation is not covered under the Act. If that is the case, the number of working days in a month changes to 30 days instead of 26 days.

Gratuity = Last drawn salary x (15/30) x Number of years of service

In the above example, if your organisation is not covered under the Act, then the calculation will be as follows:

Gratuity = Rs. 80,000 x (15/30) x 10 = Rs. 4.00 lakh

For employees covered under the Act, the benefit of a lower denomination is given. Hence, working days in a month are taken as 26 days instead of 30 days.

How can a gratuity calculator help you?

The gratuity calculator is useful in a number of situations, some of which are listed below:

• Decide how much you will get: The calculator provides you a rough indication of the gratuity you will get when you retire. It aids in calculating the pay you receive from the employer in exchange for your years of service.

• Facilitates improved financial planning: By knowing the gratuity funds, you can build a strategy. With the appropriate investments, you can enjoy your retirement without worrying about money. You can carefully arrange your funds and make other investments once you are informed of the gratuity you will receive.

• Saves time: You do not need to spend many hours determining the gratuity you will receive; you can get precise findings quickly. Enter the necessary information into the calculator to get precise results quickly.

How to use Bajaj Finance gratuity calculator?

It is easy to use the Bajaj Finance gratuity calculator. You only need to enter the correct data for the calculator to do most of the work for you. To calculate your gratuity value, provide the pertinent information below.

a. Monthly income: Using the slider, you must input the base pay and, if necessary, the dearness allowance. You can also input the value directly.
b. Tenure: The number of years spent working for the company is then entered.

Based on the above data, the gratuity calculator determines the total amount of gratuity due to you. By adjusting the input sliders, you can recalculate the gratuity whenever you like. Moving the sliders will immediately calculate the gratuity.

Benefits of Using the Bajaj Finance Gratuity Calculator

The Gratuity Calculator is a helpful tool because it makes figuring out your gratuity amount easy and quick. It takes the guesswork out of calculating and ensures you know how much money you can expect after completing a certain number of years in your job by inputting your Monthly Income (basic+DA) and tenure. This calculator is especially handy for employees to understand their entitlement and make informed financial plans.

What are the Taxation Rules for Gratuity?

Gratuity received by government employees is fully exempt from income tax.

For private employees, it hinges on whether these employees meet the eligibility criteria outlined in the Payment of Gratuity Act. Tax exemptions are determined based on this criterion.

Employees covered under the Payment of Gratuity Act enjoy tax exemption under specific circumstances. Among the following options, the one that is the least qualifies for tax exemption:

• Gratuity of Rs 20 Lakh
• The final salary amount is calculated by adding together the basic salary and dearness allowance (DA), then multiplying the result by the length of employment, and finally multiplying that by the total number of working days in a month.
• The actual gratuity amount received

Where should you invest your gratuity funds?

Gratuity funds can fetch you higher returns if invested wisely. Do not let the gratuity money stay idle in your savings account, where it will only give negative returns, accounting for inflation. You can easily earn good returns by investing such lumpsum into fixed deposits, a lucrative, safe, and highly stable investment option.