Gratuity Calculator

https://www.shriramfinance.in/gratuity-calculator

Monthly Salary (Basic + DA)

Years of Service

Total Gratuity Payable

₹ 28,846

Employees are the backbone of an organisation. The effort they put in ensures the growth and profitability of a business. While organisations compensate employees for their contributions, they also get supplementary benefits to underscore the significance of employees in driving a prosperous business. Gratuity is one such benefit employers reward employees for their long-term service.

What is Gratuity?

Gratuity is a financial benefit paid by the employer as a form of gratitude or appreciation for the employee's services towards the company. Understanding the eligibility and the exact amount of gratuity an employee can expect to receive holds great importance.

What are the Eligibility Criteria for Payment of Gratuity?

Gratuity is governed by the Payment of Gratuity Act of 1972. The law states an employee is eligible to receive gratuity only after the completion of 5 years or more in the company. However, an employee who is disabled or dies due to a disease or an accident can get the gratuity before 5 years. Employees are eligible to receive gratuity in the following cases-

Employees are eligible for gratuity if they have resigned or retired after completing 5 years of service with the organization, specifically having worked for 240 days in their fifth year.If the employee suffers a disability or dies due to an accident or illness.
The employee should be eligible for superannuation

What is a Gratuity Calculator?

A gratuity calculator is a financial tool that helps employees estimate the amount of gratuity entitlement based on their last drawn salary and years of service. You can find the gratuity amount after 5 years using the calculator. It is a simple and easy-to-use online tool that simplifies the complex manual calculation of determining the gratuity amount according to the statutory formula.

Your last drawn salary includes your basic salary, the dearness allowance, and the commission you have received from sales. The gratuity calculator online would instantly calculate the gratuity amount you are entitled to based on your input. You can use it multiple times for different gratuity year calculations.

Gratuity Calculation Formula

According to the Payment of Gratuity Act, 1972, the gratuity amount disbursed upon an employee's retirement, termination, or resignation is determined using a straightforward mathematical gratuity calculation formula, as outlined below:

Gratuity Amount = Y x S x 15/26

Where Y stands for the number of years of continuous service in the organisation, and

S stands for last drawn salary.

Here, the last drawn salary refers to the basic salary and dearness allowance. You can divide the amount by 12 for monthly gratuity calculation.

Dearness Allowance (DA) is an allowance given to employees to compensate for the rising cost of living due to inflation. The gratuity formula for central government employees and private employees is the same.

Let us take an example to understand the gratuity formula. For instance, you have worked for a company for a continuous period of 10 years, and your last drawn salary is ₹50,000, including dearness allowance. Now, you are resigning from the organisation. The gratuity formula is used to calculate gratuity as follows:

Gratuity Amount = 10 x 50000 x 15/26 = ₹2,88,462

How does a gratuity calculator work?

The gratuity calculator works on a standard gratuity formula as stated in the Gratuity Act of 1972 and gives a detailed calculation within a few seconds. You have to input two basic details to determine your gratuity amount.

Step 1: Number of years of continuous service in the organisation.

Step 2: Input your last drawn salary

Step 3: Click Calculate

The calculator will instantly show your gratuity upon retirement, resignation or termination.

How Can a Gratuity Calculator Help You?

A gratuity calculator online is a valuable tool for an organisation's employees and employers, offering several benefits and helping you understand and plan your gratuity proceeds. Here is how a gratuity calculator in 2022 might assist you:

Simplifies complex gratuity calculations and provides instant results
Provides quick estimates for financial planning
Facilitates informed decisions for both employees and employers
Easily accessible and option to use multiple times for free
Ensures transparency in gratuity entitlements

How to Use Shriram Gratuity Calculator?

The Shriram Salary Gratuity Calculator represents a user-friendly and straightforward tool accessible to all. You can use the tool online and calculate your benefit within seconds. It also aids elderly employees on the edge of retirement who cannot understand or perform the manual gratuity calculation using the statutory formula. Just access the Shriram gratuity calculator and fill in the inputs. Here are the three simple and quick steps to use the Shriram Gratuity Calculator online:

Step 1: Enter your last drawn salary

Step 2: Enter your tenure of continuous service for the gratuity year calculation

Step 3: Click on calculate

The employee gratuity calculator will show the estimated gratuity amount based on the inputs. However, be sure to read the annual or monthly gratuity calculation rules before inputting the details to get accurate figures.

Advantages of Using Shriram Gratuity Calculator

Here are some of the advantages of using the Shriram Salary Gratuity Calculator:

Quick Estimation

A gratuity calculator helps you to perform complex gratuity amount calculations quickly and swiftly. You can get the estimated gratuity figure without cumbersome manual calculations by simply inputting the basic information, such as last drawn salary and years of service. Moreover, there’s one private and Central Government gratuity calculator for quick calculations.

Comparisons

If you are a government employee, you can use the Central Government gratuity calculator to compare the amount of gratuity you might receive under different scenarios, such as varying salary levels and years of service. You can also use the calculator if you are a privately-employed individual.

Transparency

Both the employees and employers can use the calculator to get an understanding of how the amount of gratuity is calculated based on the gratuity amount calculation formula. It helps in open communication and fosters trust in the workplace.

Savings Strategy

The gratuity calculator 2022 also helps you in your saving strategy. Understanding the anticipated lump-sum gratuity amount after 5 years empowers you to structure your extended financial objectives. It includes formulating strategies for savings and investments, like funding your child's wedding or planning for your retirement.

Retirement planning

It helps you to aid in your retirement planning by offering insights into the financial resources available upon retirement.

What are the Taxation Rules for Gratuity?

The taxation rules on gratuity depend on the employee receiving the gratuity. Though the gratuity formula for central government employees is similar to that of private employees, the taxation rules differ. Have a look -

Government Employees

The gratuity amount received by a government sector employee is fully exempt from income tax. It applies to employees of the central and state government, members of the civil services and defence sector, and other local authorities.

Private sector employees covered under the Gratuity Act

The employee is eligible for tax exemption on gratuity received up to the least of the following:

The actual gratuity received

last 15 days' salary* number of completed years of service
30 lakhs

Private sector employees not covered under the Gratuity Act

The employee is eligible for tax exemption on gratuity received up to the least of the following:

actual gratuity received
last 10-month salary* number of completed years of service
10 lakhs

You can use the gratuity tax calculator to determine the tax liability on the gratuity received.

Conclusion

Calculate your gratuity amount after 5 years if the same employer employs you. Use the calculator for quick calculations and assess the gratuity you are entitled to. Also, use the gratuity tax calculator to check your tax liability on gratuity. You can use the calculated figure to plan for your financial goals. The calculator, thus, helps in financial planning and is an effective .

Frequently Asked Questions (FAQs)

How to calculate gratuity?

Gratuity can be calculated using a mathematical formula stated as follows:

Gratuity = (Last Drawn Salary × 15 / 26) × Years of Service.

Max limit: 20 times the last drawn salary or ₹30 lakhs, whichever is lower. Alternatively, you can use the Shriram Employee Gratuity Calculator, available online, to calculate gratuity.

What is the rule of gratuity calculation?

The rules and calculations of gratuity are prescribed in the Payment of Gratuity Act 1972. Here are the rules of gratuity calculation:

The last drawn salary in the gratuity calculation includes your basic salary and dearness allowance.
The years of service are rounded to the nearest whole year. When determining the years for gratuity calculation, any period less than 6 months is not counted, while any duration surpassing 6 months is considered a full additional year. For instance, if your tenure with a company is 8 years and 5 months, the count would be 8 years, discarding the 5 months. Conversely, if your service spans 8 years and 7 months, it is deemed as 9 full years.

Are 4.8 years eligible for gratuity?

As per the Gratuity Act, there’s a 5 years gratuity calculation rule. The rule states that an employee should complete at least 5 years of continuous service with the same employer to be eligible for gratuity. However, in case of an employee's disablement or death, there is a waiver option in the eligibility period, and a 5-year gratuity calculation is not applicable.

How much gratuity (%) is deducted from the salary?

There is no deduction of gratuity from the salary of the employee. In addition to salary, gratuities are provided by the employer as a form of appreciation for long and continuous service. But it cannot be deducted from the employee's salary.

Is there any upper limit on the amount of gratuity that you will receive?

Payment of Gratuity Act, 1972, the maximum gratuity cannot exceed 20 times the employees' last drawn salary. Any amount above this limit does not get covered under the Act.

How much time does the employer take to release the gratuity amount?

The employer should pay the employee the gratuity amount within 30 days from the date when the gratuity becomes payable. In situations of delay, the employer can provide interest for the duration of the delay on the payable sum.

What kind of employees does the Gratuity Act of 1972 cover?

The Gratuity Act of 1972 applies to employees working in establishments, shops, factories, mines, oilfields, plantations, ports, railways, and other establishments where the Act is applicable. You can check your gratuity amount after 5 years using our gratuity calculator.

Is there a maximum limit on the Gratuity amount that you will receive?

The Gratuity Act, 1972 provides for payment of gratuity at a rate equivalent to 15 days' wages for every completed year of service subject to a maximum of ₹30 lakhs. Hence, the maximum limit on gratuity amount is ₹30 lakhs.

Will I lose the gratuity amount if my employer goes bankrupt?

If an employer becomes bankrupt, there might be challenges in receiving the amount of gratuity. However, in some cases, employees might be covered by government schemes providing compensation in such situations.

How is gratuity calculated in salary?

Gratuity is computed using a gratuity calculation formula, accounting for your final earned salary and the total years of completed service. Each interval of 6 months or greater is considered a whole year, while durations less than 6 months get disregarded. The last drawn salary encompasses the basic salary and dearness allowance.