Gratuity Calculator

Gratuity is an amount an employee is entitled to receive from their employer if they retire after completing 5 years in the company. The Payment of Gratuity Act 1972, governs the payment of gratuities. A gratuity calculator helps the user calculate gratuity amount payable to them by their employer based on their last drawn salary and their years of service.

The calculation of the gratuity amount is important for retirement planning. However, this can be a strenuous task. To automate this process and make calculating gratuity quick and accurate, Angel One has built an online gratuity calculator. Using this, you can ascertain the estimated gratuity amount you would receive at the end of your service in an organisation.

An online gratuity calculator uses the gratuity calculator formula to automatically show you how much gratuity amount you would receive if you meet all the criteria for the payment. The formula is different for the following two categories of employees:

1. Employees covered under the Payment of Gratuity Act, 1972
2. Employees not covered under the Payment of Gratuity Act, 1972

The difference between the two categories is that in the first case, the number of working days in a month is 26, and in the second case, it is 30 days.

The following is the gratuity calculator formula for employees who are eligible under the Payment of Gratuity Act 1972:

Gratuity = Last Drawn Salary × Number of Years of Service × 15/26

In this case,

The number of working days is considered to be 26

The gratuity calculation is accounted at the rate of 15 days' wages

The last drawn salary includes

1. Basic pay
2. Dearness allowance (DA)
3. Sales commissions (if any)

The gratuity calculator formula for employees not covered under the Payment of Gratuity Act, 1972 is:

Gratuity = Last Drawn Salary × Number of Years of Service × 15/30

Let us consider an example to understand the formula for calculating the gratuity. Suppose you fall under the category of employees who are covered under the Payment of Gratuity Act 1972. You have been working in a company for 7 years, and the last drawn salary is ₹53,000. Then, the gratuity you will receive from the company is,

Gratuity = Last Drawn Salary × Number of Years of Service × 15/26

= ₹53,000 X 7 X 15/26

= ₹2,14,038.46

You will receive a gratuity of ₹2,14,038.46 from your employers for your services. However, instead of manual calculations, which are prone to errors and time-consuming, you can use the Angel One Gratuity Calculator to arrive at this figure.

To use the calculator, simply visit the Angel One online gratuity calculator page and enter the values of:

1. Your last drawn monthly salary (including basic pay, DA and sales commissions).
2. The number of years of service that you have worked in the company.

The calculator will then show the total gratuity payable to you.

For example, if you have worked for 8 years in the company and your last drawn monthly salary was ₹3 lakh, then entering those values in the calculator will show your gratuity payable as ₹13,84,615.

If you had worked for more than 8 years but less than 9 years, then the number would be rounded off to the nearest whole number. Suppose it is 8 years 8 months, it is rounded off to 9 years, and 8 years 3 months rounded off to 8 years.

According to the number of years of experience you possess in a particular company, you can compute the gratuity you can expect from your employer.

1. It helps you calculate gratuity amount you are entitled to at the end of your service with an organisation.
2. The results are fast, allowing you to quickly calculate the gratuity payable for various years of service and salary levels and compare them.
3. It is free to use. You can use the Angel One gratuity calculator anytime from anywhere at your convenience.

As per the Payment of Gratuity Act, all organisations with at least 10 employees working on a single day in the preceding 12 months must pay gratuity. Employees may be paid gratuity even if they do not fall under the above-mentioned act. To receive the gratuity, the employee must:

1. Be eligible for superannuation or retirement benefits.
2. Have resigned after continuous employment of 5 years with the company. However, the employee can receive the amount even before 5 years if they get disabled due to an accident or disease.

In case of the employee’s death, the gratuity is paid to the nominee. If the employee’s disablement is due to sickness or accident, the gratuity is paid to the employee.

Taxation on the gratuity amount depends on whether the employee works for the government or in the private sector.

For government employees (central/state/local authority), the gratuity received is entirely exempt from the income tax.

For eligible private employees, the lowest of the following three amounts will be exempt from income tax:

1. ₹20 lakh
2. The actual amount of gratuity received
3. The eligible gratuity

For example, consider the gratuity calculation given in the earlier example. Suppose your employer had actually paid you ₹15 lakh as gratuity. As per the earlier example, you are eligible for a gratuity of ₹13,84,615 only.

The lowest of the three figures (i.e. 20 lakh, 15 lakh and 13.84 lakh) is ₹13,84,615, which therefore becomes exempt from tax. The remaining amount out of the ₹15 lakh, i.e. ₹1,15,385, is taxed at the rate corresponding to your income tax slab.

As you can see, the maximum tax-exempt gratuity amount in your entire working life can be ₹20 lakh.