A gratuity calculator is a tool that helps individuals estimate the amount of gratuity they are eligible to receive based on their years of service and last drawn salary. It simplifies the calculation process and provides an approximation of the gratuity amount that an employee may be entitled to under the Payment of Gratuity Act, 1972.

By using a gratuity calculator, individuals can input their details such as years of service and last drawn salary, and the calculator applies the appropriate formula specified in the Gratuity Act to calculate the gratuity amount. It considers factors like the duration of service and salary to arrive at an estimate.

Using a gratuity calculator allows individuals to experiment with different scenarios, such as varying years of service or changing salary levels, to assess how those factors impact the gratuity amount. It aids in financial planning, retirement planning, and helps individuals make informed decisions regarding their employment and future financial goals.

However, it's important to note that the gratuity calculator provides an approximate estimate, and the final gratuity amount will be determined by the employer based on the actual calculations and provisions of the Gratuity Act.

Gratuity is a lump sum payment made by an employer to an employee as a token of appreciation for the employee's long and continuous service upon retirement, resignation, or termination. It is a form of employee benefit provided by the employer and is governed by the Payment of Gratuity Act, 1972 in India.

Here are some key features of gratuity:

• Eligibility: Gratuity is applicable to employees in establishments employing ten or more individuals. An employee becomes eligible for gratuity after completing five years of continuous service with the same employer. However, in case of the employee's death or disability, the eligibility criteria may be waived.

• Calculation: The gratuity amount is calculated based on a formula specified in the Gratuity Act. It depends on the employee's last drawn salary and the number of years of completed service. The formula is: (Last drawn salary × 15/26) * number of years of service.

• Payment: Upon becoming eligible for gratuity, the employee is entitled to receive the gratuity amount. The employer usually paysit as a lump sum, although it can be paid in installments if the amount is large.

• Taxation: The tax treatment of gratuity depends on whether the employer is covered under the Payment of Gratuity Act or not. For employees covered under the Act, the gratuity amount is exempt from income tax up to a certain limit specified by the government. For employees in non-covered establishments, the exemption limit is lower. Gratuity serves as a financial benefit to employees, providing them with a lump sum payment upon completion of a significant period of service. It is intended to acknowledge their contribution and provide some financial security during their retirement or separation from the organization.

The formula used by our online gratuity calculator is: