Overview of Gratuity Exemption Calculator

There are different monetary facilities offered by companies to their employees, and one such is gratuity. An employee working for a company paying EPF is also eligible to receive a gratuity if worked for more than 5 years. If you are still determining the total gratuity amount you will receive after 5 years of working, you can use the gratuity calculator available online.

Using the calculator, you can know how much the company owns you. You need to enter the required details, and you will get the result.

Let us now get deeper into gratuity and its calculator.

What is Gratuity?

Gratuity is a part of employee benefits, where an employer pays a sum to an employee as compensation for services rendered to the business. However, the gratuity sum is only awarded to staff members who have worked for at least 5 years. This employee benefit is governed under the Payment of Gratuity Act of 1972, ensuring no employee is left with the benefit of falling under the eligibility.

However, there is an exception: if an accident or illness renders the employee handicapped before five years, they are eligible to receive their gratuity. Your gratuity amount depends on the years you have worked for the company and your most recent income.

What is a Gratuity Calculator?

A gratuity calculator is an online tool that helps you to know how much of a gratuity an employee is entitled to receive after retiring or quitting the job. Moreover, it is a valuable tool for staff members seeking to retire voluntarily within an organization, as it is a gratuity calculator.

The formula used by this gratuity calculator considers several variables, including the total years of job, the dearness allowance, and the last drawn salary.

What is the Formula for Gratuity Calculation?

There are two different formulas used. One for the employer covered under the Gratuity Act-

Gratuity = n*b*15 / 26

Where

• n- total tenure of service completed in the company
• b- basic salary + dearness allowance (last drawn)

If an employee leaves the company after 8 years of service with a basic salary of Rs 2 lakhs. The calculation would be:

2,00,000*8*(15/26)

Gratuity amount- Rs 9,23,076

Second, for an employer who is not covered under the Gratuity Act-

Gratuity= n*b*15/30

If an employee leaves the job after 7 years with the basic salary of Rs 30,000. The calculation would be

Gratuity Amount = (15 * 30,000 * 7) / 30 so the amount would be Rs 1,05,000.

How to use Gratuity Calculator?

Using the Gratuity calculator is relatively easy. You need to follow below steps-

• Enter basic pay and DA.
• Enter the total years of service of the employee.
• The calculator will then show the result of the total amount the company owes you.
• You are free to adjust input sliders to recalculate the gratuity.

What are the tax rules for Gratuity Payment?

The tax rules in gratuity payments depend on the employee type. Some of these are-

• Any amount a government employee receives in gratuities is not subject to income tax.
• Any private employee whose employer is protected by the Gratuity Payment Act. In this case, the lowest of the following three sums will not be subject to income tax:
• Twenty lakh rupees.
• The precise gratuity amount.
• Eligible gratuity

Conclusion

Gratuity is one way of receiving a retirement amount that you can save. You can expect a good return if you have been working for a company for decades. The best you can do is make the best use of gratuity.

FAQs – Gratuity Exemption Calculator

1. Is it necessary for an employee to work for 5 or more years to receive gratuity?

Ans. It is legally required to work for a company for five years to be eligible for a gratuity. Nonetheless, the company may pay the gratuity sum before the five-year mark if the employee passes away or becomes disabled.

2. What is the cap on gratuity?

Ans. The current cap on gratuity for an employee is up to Rs 20 lakhs, be it in retirement or death. However, the employee is free to pay the amount above the ceiling.

3. Is a temporary or contractual employee eligible for gratuity?

Ans. Yes, all employees irrespective of the nature of the complete 5 years, are eligible to get the gratuity amount.

4. How much time is needed to release the gratuity amount?

Ans. Once the employer receives the application for gratuity within 15 days from the employee, it is important to specify the amount. It should be paid within 30 days of receiving the application.

5. If the company goes bankrupt, will I still receive the gratuity amount?

Ans. Yes, you are still eligible to get the gratuity even if the company goes bankrupt.

6. Is the gratuity part of your CTC?

Ans. Yes, it is a part of CTC an employee receives from the company.

7. Is there any limitation to use the gratuity calculator?

Ans. No, there is no such limitation to using an online gratuity calculator. You can use it as much as possible.