Gratuity is generally referred to the amount of money that an employee receives from his employer in exchange for the services that the employee proffers to the company. This is administered by the Payment of Gratuity Act, 1972. This Act ensures that any employee who has been of service to the company for five or more years should be provided the gratuity amount.
However, this gratuity amount can be accessed by an employee if he/she becomes impaired or disabled due to some accident or disease. The amount of Gratuity basically depends on the last drawn salary of that employee and the years of service the employee has rendered to the company.
To avail the gratuity, the following requirements must be met by a certain employee:
A gratuity calculator helps you in calculating the gratuity amount by making use of the formula devised for its calculation. The gratuity calculator formula is as follows:
Gratuity= [15*(your last drawn salary)*(tenure of working)]/26
A Gratuity calculator can be defined as tool which avails you with an idea of the approximate amount that you will receive if you ever decide to quit your job, after offering five years of continuous employment to the company. It is a simple and easy to use tool that is used to calculate gratuity when you retire from the company.
To use Gratuity calculator, you need to input the value of your last drawn salary and the tenure or the amount of time for which you have continuously rendered your services to the company. The last drawn salary comprises of the basic salary, dearness allowance, and the amount of commission that you have obtained from your sales.
Type A: If the employer comes under the Gratuity Act, then the gratuity of such employees can be easily calculated by making use of the formula for gratuity calculator i.e.
t= tenure of continuous employment in the company
b= Last drawn basic salary+ dearness allowance
For instance, if Mukesh has worked in a Textile Industry for a tenure of 20 years and his last drawn basic salary combined with the dearness allowance was 40,000. Then, the amount of gratuity that he will get is,
Gratuity Amount = (20*40,000*15)/26
= Rs. 4, 61,538
However, while using gratuity calculator following points must be kept in mind.
Type B: For the employees of those employers who does not fall under the Gratuity Act, then the amount of gratuity will be calculated according to the half-month salary on each completed year of employment. The formula for such gratuity calculator is:
Gratuity= [15*(your last drawn salary)*(tenure of working)]/30
For instance, if your basic salary is Rs. 50,000 and you have been of service in the company for 8 years, then the amount of gratuity that you will receive will be:
Gratuity Amount= (15*50,000*8)/30
= Rs. 2, 00, 000
The amount of tax of the amount of gratuity usually varies with the type of employee who is going to receive that gratuity amount.
For instance, if you got paid Rs. 12 lakhs as a gratuity by your employer and the amount of gratuity that you are eligible of is Rs. 4, 61, 538. The government has issued Rs. 20 lakh as the maximum tax-free limit. The lowest of all the amounts here is 4, 61, 538 which is going to be exempt of any taxes. Therefore, you have to pay tax on the remaining amount as per the income tax-slab issued for you.