Gratuity calculator for employees: This is how to calculate money that company owes you; step by step guide

Gratuity calculator: Are you employed? Have you completed around 10 to 15 years of job in the same company? Do you know how much of your gratuity is accumulated with the company? How much amount is held with the company as your gratuity and how much you will receive on retiring or leaving the job? Zee Business spoke to tax expert Manish Gupta and according to him, gratuity is given by the company to its employees in gratitude for the service of an employee.

What is gratuity?
- Gratuity is money paid to employees by a company for the work that they do
- Employee is required to complete at least 5 years in a particular  job to get gratuity.
- Gratuity to be paid if the company has 10 or more employees
- Rules are set in the Payment of Gratuity Act, 1972

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When do you get gratuity?

- You have resigned after working for 5 years
- Employee has retired
- If you are entitled for pension
- In case of employee's death/accident
- In case you are changing jobs, you will be benefitted under certain conditions

How will you get gratuity?

- It is necessary to give 5 years of continuous service to the employee
- If you leave the job before 5 years, then there is no use
- Leave will not be included due to sickness or strike
- Maternity leave will also be covered over a period of 5 years

Gratuity before 5 years?

- Under certain circumstances, gratuity can be received before 5 years
- Employee dies before a period of 5 years
- Employee is crippled, unable to work
- In these situations, it is possible to get gratuity before 5 years

How much tax exemption on gratuity?

- Tax on gratuity is exempted under Income Tax Act
- Gratuity gets a tax exemption up to a certain limit
- Tax free gratuity has now been increased to Rs 20 lakhs
- Earlier the tax free gratuity limit was Rs 10 lakh.
- Notification was issued on March 29, 2018

How much is the maximum gratuity available?

- There is no maximum limit of gratuity
- The company can give gratuity on its own
- Up to Rs 20 lakh gratuity is tax free
- Gratuity above Rs 20 lakh will be taxed

Rules different for public and private employees?

- Payment of gratuity act is also applicable to government institutions
- There are uniform rules for public-private employees.
- There are many institutions to which the Gratuity Act does not apply
- Such institutes can calculate gratuity separately

How to calculate gratuity?

- How much gratuity will you get? Depend on these 2 factors, first, how many years did you serve in the company and second, based on your last salary

- Last salary of every year of service is important
- 15 days calculation of last salary
- Salary includes basic and dearness allowance.

This is the formula

- Gratuity is a formula to be fixed
- 15x Last salary x Years of service/26

Examples:

- Naveen is an engineer
- Naveen has served the company for 20 years.
- Naveen's last salary was Rs 20,000
- In this case, his gratuity will be Rs 2,30,769.

CTC: Cost to Company

- CTC is what company is spending on you and gratuity will be included in CTC if it is in your appointment letter
- Nothing mentioned about gratuity in letter- In such a situation you will get gratuity only after 5 years

How many days do you get gratuity?

- You have worked in the company for 5 years
- Resigned from the job, is entitled to gratuity
- Gratuity should be received within 30 days of leaving the job

Is gratuity only for salaried people?

- Currently, gratuity is only for salaried people
- Currently, this facility is not available for small traders/others.
- Company/Institute has 10 or more employees
- Only employees of these companies will get benefit

Gratuity for those not in the realm?

- Companies / Institutions which are not covered by the Gratuity Act
- Such companies can also give gratuity to their employees
- Giving/not giving gratuity to employees, it is up to the company