Gratuity Calculator


Total Gratuity payable

Gratuity calculator is a tool to estimate the gratuity amount one receives if they are planning to leave the job. It is a helpful tool for those employees who are planning to retire from their job. The gratuity calculator works on a formula that uses several inputs. These include last drawn monthly income, the number of years of service (including months) and dearness allowance. The calculator returns the gratuity amount within seconds, and it is straightforward to use. It is free to use multiple times. Also, the calculator helps in long term financial planning to have a stress free retirement.

What is Gratuity in India?

Gratuity is the monetary benefit an employee receives in lumpsum by the company. The company pays it as a gratitude for his/her services to the company. The motive behind gratuity payments is to provide retirement benefits to the employees. Payment of Gratuity Act, 1972 governs the gratuity and its payment rules. Under this Act, an employee has to fulfill specific criteria to be eligible for gratuity payment. The employee must work for at least five years in the company continuously. Employee must not have another full-time employer. In case of death or disability of the employee, even before completion of 5 years, the employee is eligible for gratuity. The gratuity amount cannot exceed INR 10 lakhs. The excess, if any, falls under ex-gratia. Ex-gratia is a voluntary contribution and not compulsorily imposed by law.

The number of months of service is significant in gratuity calculation. In the last year of employment, if the employee works for more than six months, it is rounded off to the next number. For example, if an employee works for 15 years seven months, the number of years of service will be 16 years. However, if the employee works for only 15 years and five months, the number of years of service will be 15 years.

The Payment of Gratuity Act, 1972, prescribes rules for the calculation of gratuity. Under these rules, there are two categories of employees. Namely, employees covered under the Act and employees not covered under the Act. The Act also lists criteria for the organizations that fall under the purview of the Act.

Gratuity Calculation Formula

The formula used by our online gratuity calculator is:

G = n*b*15/26

In the formula, the values are the following.

N/nThe number of years you have worked in the concerned organisation
B/bLast drawn basic salary plus Dearness Allowance (DA)
GGratuity amount you are eligible for

For example, if individual A has worked with an organisation for 5 years, and your basic salary plus DA amounted to Rs. 30,000 every month, you are eligible to receive 5*30000*15/26 = Rs. 86,538.46 as gratuity.

Note that under the existing laws –

  • Your gratuity cannot exceed Rs. 10 Lakh in its entirety. Any amount beyond this upper limit is called ex gratia payment.
  • Also, if you have worked for, say 17 years and 6 months, the figure will be rounded off to the nearest single digit or 18 years.

What is a Gratuity Calculator?

Gratuity calculator is an online tool that you can use to calculate the gratuity due from your service in the company.

You need to fill in the following details to get things done:

  • Monthly salary (Basic + DA): The last withdrawn salary (Basic salary plus Dearness Allowance) from your company.
  • Years of employment: Number of years you worked in the company

Based on this couple of details, the gratuity calculator will do the required calculation automatically and show you the final gratuity amount. You can use the CashZeni gratuity calculator to know your gratuity amount accurately.

How does Gratuity work?

Gratuity is typically paid by an employer either directly from their own funds or through a gratuity insurance plan with a third-party service provider.

If the employer chooses the latter option, they make annual contributions to the insurance company, which then pays out the gratuity amount to the employee according to the policy guidelines.

An employee generally does not need to contribute towards the gratuity amount, as it is entirely funded by the employer. However, in India, paying gratuity is mandated by law on the completion of 5 years of service.

Eligibility for Gratuity in India

To be eligible to receive gratuity benefits, the employee must fit into the following criteria:

  1. The individual must be eligible for superannuation.
  2. The individual must have resigned from the job after working for 5 years continuously
  3. He/she should not have any other full-time employer.
  4. He/she must be retired from the job.

In case of death, disability, or sickness of the individual, there is an exception to the five years criteria.

Which Organization is Eligible for Gratuity?

The Payment of Gratuity Act extends to the whole of India. It shall apply to:

  1. Every factory, mine, plantation, port, and the railway company
  2. Every shop or establishment within the meaning of any law. In which ten or more employees are employed or were employed on any day of the preceding 12 months.
  3. Every shop or establishment in which ten or more employees are employed or were employed on any day of the preceding 12 months as the central government may specify.

In other words, any organization having ten or more employees on a single day in the last 12 months comes under the purview of the Payment of Gratuity Act, 1972.

Advantages of Using Gratuity Calculator

A gratuity calculator is completely easy-to-use and offers you the following benefits:

  • It lets you know the exact gratuity amount that you are eligible to receive from your employer.
  • It only requires you to enter your salary and years of service in the company. Based on only these two inputs, the gratuity calculator will show you the final value of gratuity.
  • The gratuity calculator saves you from using the complicated gratuity calculation formula 2022. It uses the formula and shows you the gratuity amount instantly.
  • If you are planning to continue your service for long, you can use the gratuity calculator to do proper financial planning. 

It is necessary to calculate your gratuity in order to claim the full amount that you are entitled to. Knowing this beforehand will help you to plan your finances in a better way. You can use a gratuity calculator for this purpose and know your gratuity value instantly.

Taxation Rules for Gratuity

The taxes applicable to the gratuity amount depends on the type of employee:

The gratuity amount received by any government employee is exempt from the income tax.
For private-sector employees, the least of the following three amounts will be exempt from income tax provided that the employer is covered under the Payment of Gratuity Act,

  • Rs 20 lakh.
  • The actual gratuity amount received.
  • The eligible gratuity.

The maximum tax-exempt gratuity amount an employee can claim in his/her entire professional life cannot go beyond Rs 20 lakh.

Frequently Asked Questions

What is a gratuity calculator?

A gratuity calculator is an online tool that helps you estimate the gratuity amount you are eligible to receive based on your salary, years of service, and other relevant factors.

How does a gratuity calculator work?

Gratuity calculators use a predefined formula based on the applicable gratuity rules and regulations in your country to calculate the gratuity amount. They typically require you to input information such as your salary, years of service, and retirement age.

Is a gratuity calculator accurate?

Gratuity calculators provide estimates based on the information you provide. While they strive to be accurate, the final gratuity amount may vary depending on specific rules and policies implemented by your employer or the local labor laws.

Is the gratuity amount taxable?

In many countries, gratuity payments are tax-free up to a certain limit. However, tax rules can vary, so it’s advisable to consult with a tax professional or refer to local tax regulations to determine the tax treatment of gratuity in your country.

Can a gratuity calculator be used for self-employed individuals?

Gratuity calculators are primarily designed for employees who are eligible for gratuity payments. If you are self-employed, the concept of gratuity may not apply, and the calculator may not be suitable for your situation.

Are there any limitations to using a gratuity calculator?

Gratuity calculators provide estimates based on general formulas. They may not account for specific circumstances such as variable salaries, non-standard employment contracts, or special gratuity rules for certain industries. Individual employer policies can also impact the actual gratuity amount.

Can I use a gratuity calculator to negotiate my gratuity amount with my employer?

Gratuity calculators can be helpful in understanding the potential gratuity you might be entitled to, but they may not be directly used as negotiation tools. Negotiating gratuity terms typically involves discussing with your employer and considering factors beyond the calculator’s scope, such as company policies and employment contracts.