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Gratuity Calculator
560
Total Gratuity Payable To You
Monthly Salary (Basic Pay + D.A)₹10,000.00
No.of Years of Service5
Total₹28,846.15
Meaning of Gratuity
Gratuity is an amount paid to an employee at the end of their service with an organization.
Governed by the Payment of Gratuity Act of 1972, it is given as a monetary reward in appreciation of their work and dedication to the organization. It serves as a financial safety net that can cover various expenses such as medical bills, housing, or investment opportunities.
In short- it can be treated as an Additional Retirement Benefit.
What is a Gratuity Calculator?
Keka's Gratuity Calculator is a Free, Easy-to-use tool that does not require any technical expertise.
The Gratuity Calculator helps you plan for retirement and long-term financial planning, especially for those who desire to allocate the Gratuity amount for maximum returns.
The calculator provides the amount within seconds based on the Gratuity Formula.
How to use Keka's Gratuity Calculator?
Keka's Gratuity Calculator is the most easy-to-use and sophisticated tool to Calculate Gratuity. The calculator only requires the employee to enter the correct data to estimate the Gratuity Amount in seconds.
Input the following details using Keka's Gratuity Calculator:
1. Enter the Basic Monthly Salary [Basic pay + Dearness allowance (if applicable)] in the respective field
2. Using the slider, input the number of years spent working for the organization
Based on the data above, Keka's Gratuity Calculator calculates the total Gratuity Amount payable to you in seconds.
You can recalculate the Gratuity Amount whenever you like by adjusting the input slider and re-entering your updated monthly salary in the steps above.
Importance of Gratuity Calculation
Retirement Planning: During unforeseen circumstances like medical emergencies and sudden financial requirements, Gratuity offers a degree of Financial Stability. Accurate calculation helps employees estimate their financial position upon retirement. This helps them make informed decisions enhancing their retirement security.
Transparent Compensation: Accurate Gratuity Calculation ensures employees receive a fair Gratuity Amount for their years of service. This avoids any kind of discrepancies in the Gratuity Amount and ensures employees are treated equitably. It also helps one reflect on their contributions and commitment to the organization.
Legal Protection: This ensures that the organization complies with Gratuity Rules according to The Payment of Gratuity Act, 1972. Accurate calculation provides employees legal protection, ensuring that they receive the Gratuity Amount that they are legally entitled to under the Act.
Budgeting for Employers: Calculating the Gratuity amount accurately also enables Employers to allocate funds accordingly. Organizations can forecast their financial obligations and ensure sufficient resources to meet future gratuity payments.
Benefits of Using Keka’s Gratuity Calculator
Get to know your gratuity amount payable to you in seconds
Accurate Results
Shows you the exact gratuity amount you are eligible to receive employer in seconds and eliminates human error
Financial Planning
Once you know the Gratuity Amount you will receive, you can allocate your funds and make other investments
Transparency
Provides transparency in the calculations using standardised formulas and parameters, reducing potential disputes
Time-Saving
Get precise results quickly without spending hours manually determining the gratuity amount you will receive
Convenient Accessibility
The calculator can be used anywhere or from the comfort of your home to determine the gratuity amount
Data Security
Keka's servers are safe to use keeping all essential details about employment history secure
Before we get to the details of Gratuity Formula, it's important to understand that employees are categorized under 2 categories based on their coverage under The Payment of Gratuity Act, 1972.
For Employees covered under the Gratuity Act
GGratuity amount you are eligible for
NNumber of completed years in the organization
BBasic salary (last) + Dearness allowance that was drawn
15days salary is provided for each completed year
26number of estimated working days
Example:
Mr. X -- The number of years completed in the organization is 7 years and the last drawn salary with dearness allowance accounts for ₹1 Lakh.
Gratuity = 7 × 1,00,000 x (15/26) =₹74,03,843
For Employees not covered under the Gratuity Act
GGratuity amount you are eligible for
NNumber of completed years in the organization
BBasic salary (last) + Dearness allowance that was drawn
15days salary is provided for each completed year
26number of estimated working days
Example:
Mr. X would still receive the Gratuity Amount even if the organization was not covered by the Gratuity Act. However, the number of estimated working days will be increased from 26 to 30 -- the number of years completed in the organization is 7 years and the last drawn salary with dearness allowance accounts for ₹1 Lakh.
Gratuity = 7 x 1,00,000 x (15/30) =₹3,50,000
Advantages of Gratuity
Secure Retirement
Gratuity ensures a financial cushion for employees, providing a reliable source of income during retirement years.
Employee Loyalty
Offering gratuity helps in encouraging long-term commitment and dedication to the organization.
Legal Protection
Gratuity is legally mandated in many countries, protecting employees' rights and ensuring fair compensation.
Importance of Gratuity Calculation
According to the Income Tax Act of 1961, Gratuity received by an employee is considered a component of their pay and is subject to taxation. While filing Income tax returns, the taxable Gratuity Amount is considered as 'Income from Salary'. The taxation on Gratuity depends on the type of Employee. This is briefly divided into 3 main categories:
1. Government Employees:
All Government Employees (central/state/local authority) are eligible to avail complete tax exemption on the Gratuity Amount. The Gratuity received is 100% Tax exempt.
2. Non-Government Employees Covered Under the Act:
Employees receiving Gratuity under The Payment of Gratuity Act, 1972, can avail tax exemption on the least of the following 3 amounts.
Actual Gratuity Amount received by the employee
Last drawn salary x tenure of service x 15/26
₹20,00,000 Gratuity Amount (Maximum Limit notified by the Government)
3. Non-Government Employees Not Covered Under the Act:
Employees receiving Gratuity that is not under The Payment of Gratuity Act, 1972, can avail tax exemption on the least of the following 3 amounts.
Actual Gratuity Amount received by the employee
Half-month average salary x tenure of service
₹20,00,000 Gratuity Amount (Maximum Limit notified by the Government)
Note: Any Gratuity Amount received that exceeds the above limit is taxable as per the Income Tax Slab. Example: If you have received a gratuity of ₹10,00,000. As per the gratuity calculation in the section above - How to Use Keka's Gratuity Calculator, you are eligible for a gratuity amount of ₹4,03,846. The Maximum tax-free limit set by the Government is ₹20,00,000. From the 3 figures mentioned, the least amount is ₹4,03,846 which is exempt from tax. The remaining amount of ₹9,56,154 will be taxable as per the income tax slab.
Frequently Asked Questions
What information do I need to use a gratuity calculator?
The formula to calculate gratuity would require 2 important employee information Gratuity(G) = N x B x 15/26 N – Number of years served in the organization B – Last drawn monthly salary including Dearness Allowance (if applicable)
Can I use a gratuity calculator for any country?
Gratuity Calculators are country specific as gratuity laws and regulations vary between countries. Every country has its formula and rules to calculate the gratuity amount. Hence, it is important to use a gratuity calculator that is designed for a specific country to ensure compliance with local laws and accurate gratuity calculations
Is there a free Gratuity Calculator available?
Keka’s Free Gratuity Calculator is designed to be the most easy-to-use and sophisticated tool. The calculator only requires the employee to enter the correct data to estimate the Gratuity Amount in seconds.
How accurate is a Gratuity Calculator?
Keka’s Gratuity Calculator eliminates human error by using a propriety formula. The Gratuity Calculator shows you the exact gratuity amount you are eligible to receive from your employer in seconds. It saves the time spent manually calculating the gratuity amount.
Can a Gratuity Calculator estimate gratuity for different salary levels?
The Gratuity Amount is calculated based on the basic monthly salary and dearness allowance (if applicable). It is 4.81% of the basic salary and the gratuity amount can be recalculated whenever by adjusting the input slider and re-entering the updated monthly salary.
Does a Gratuity Calculator consider the number of years of service?
Gratuity is payable only after an employee has completed 5 or more years of continuous service with the organization. However, the number of years must be rounded to full years. Example: If the employee has been working for 7 years, 3 months, the tenure of service will be considered as 7 years. But if the employee has been working for 7 years, 7 months, the tenure of service would be 8 years.
Can I calculate gratuity for multiple jobs using a Gratuity Calculator?
According to the Gratuity Act, an employee is eligible for gratuity after completing a minimum of 5 years in the organization. These 5 years must be continuous and there should not be any gap in the tenure of service with the organization. The Gratuity Calculator will then calculate based on the total number of years and last drawn salary from the organization.
Can a Gratuity Calculator account for bonus payments or incentives?
According to the Gratuity formula, the basic salary and dearness allowance (if applicable) are included in the last drawn salary. The Gratuity calculator will not account for any other bonus payments or incentives. Included is – Dearness allowance which is a cost-of-living adjustment that is paid to employees by the Government.
Does a Gratuity Calculator provide a breakdown of the gratuity calculation?
The Gratuity calculator only shows the gratuity figure in seconds based on the last drawn salary and tenure of service.
Can a Gratuity Calculator help me plan for retirement?
By knowing the gratuity amount via a gratuity calculator, employees can build a financial strategy. With appropriate investments, and allocating funds, one can enjoy retirement without worrying about finances.
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