Gratuity Calculator

What is Gratuity?

Gratuity is a financial benefit provided to employees as a token of appreciation for their continuous service to an organization. It acts as a retirement or resignation benefit under the Payment of Gratuity Act, 1972, applicable to eligible employees in India.

Who is Eligible for Gratuity?

• Employees who have completed at least 5 years of continuous service in an organization.
• Exceptions: In cases of death or disability, the 5-year rule does not apply.

How is Gratuity Calculated?

Gratuity is calculated using this formula for central government employees:Gratuity=(Basic Pay + DA)×Years of Service×12\text{Gratuity} = \text{(Basic Pay + DA)} \times \text{Years of Service} \times \frac{1}{2}Gratuity=(Basic Pay + DA)×Years of Service×21​

Key Points of the Gratuity

• Basic Pay: The fixed salary excluding allowances.
• DA (Dearness Allowance): Cost of living adjustment to offset inflation.
• Maximum Gratuity Limit: ₹20 Lakhs (as per government rules).

Benefits of Gratuity

1. Financial Security: Helps employees meet post-retirement or resignation expenses.
2. Tax-Free Returns: Gratuity is exempt from tax up to ₹20 Lakhs under Section 10(10) of the Income Tax Act.
3. Recognition of Loyalty: Encourages long-term association with an organization.

Why Use a Gratuity Calculator?

1. Accuracy: Quickly and accurately compute gratuity amounts.
2. Transparency: Understand your benefits under government policies.
3. Financial Planning: Helps employees plan future investments and expenses effectively.