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How Does the Online Gratuity Calculator Work in India?

Personal Finance
08-11-2023

Want to know how to make use of a gratuity calculator in India? Curious about how it functions and how to calculate gratuity? Well, then you are in the right place. The gratuity calculator calculates the amount of gratuity you will receive after working for the same company for 5 years and then leaving.

Let’s discuss in detail the gratuity, the formula for calculating the gratuity, the gratuity calculator online, and more.

What is Gratuity?

It is a simple cash benefit that you receive from your employer in return for the services you provide to them. You have to work for a company for a minimum of 5 years or more to receive a gratuity fund. This is given as a token of appreciation for your commitment to your profession and your contribution to the job.

You can also receive your gratuity fund if you are terminated from your job or if you are retired. A gratuity fund is usually given after retirement, resignation, or termination from a job in India. This keeps piling up in your total funds, which you receive collectively from your employer. The rules and regulations work according to the Gratuity Act of 1972.

What is a Gratuity Calculator Online?

A gratuity calculator is a device that helps you calculate the gratuity money that you are going to receive after your retirement or resignation. The gratuity calculator online uses a standard gratuity formula to help you estimate your gratuity fund.

There are various rules on how to calculate the gratuity fund, and you have to keep certain things in mind beforehand.

What is the Formula to Calculate Gratuity?

According to the Indian Gratuity Act of 1972, there are two categories for which gratuity calculation is done.

1. Category 1 – Employees who come under the Act.

This formula is based on two important points: (a) the number of years of service to the company and (b) the last salary.

This is how a gratuity calculator in India calculates the gratuity fund.

Gratuity = Last salary drawn × 15/working days ×Number of service years

[The standard number of working days for this category is 26 days.]

Here, the last salary you drew from your bank account is multiplied by 15 and divided by the number of working days and the number of service years.

One doubt you might have about the number 15. This is because the gratuity fund is always calculated at the rate of 15 days’ wages.

Also, the last-drawn salary is not only the basic pay you get from your employer. It also includes your dearness allowance (if you work for the government) and the commission you get from your employer.

For instance: if your last drawn salary is 20 thousand INR and you have drawn it for 5 years, then by using a gratuity calculator online, your gratuity fund sums up to:

GF = 20,000×15/26×5 = 57,000/-(approximately)

Here are your estimated work days in a month: 26.

1. Category 2 – Employees who do not come under the Act.

In case you are not covered under the act, you are still going to get your gratuity fund. But, there is a slight change in the gratuity formula.

Instead of 26 days of work, your number of days of work will be marked as 30 days.

So, the gratuity formula remains the same in this case.

Gratuity = Last salary drawn × 15/Number of working days×Number of service years

[The standard number of working days is 30 days for this category.]

For instance, if your last drawn salary is 20 thousand rupees and your number of years of service is five, then the gratuity calculator online calculates your gratuity fund as follows:

GF= 20,000 × 15/30 × 5 = 50,000/-

Here, the only difference is that your working days are marked as 30 days.

How to Use a Gratuity Calculator Online?

Here are two simple steps to follow to use a gratuity calculator online:

1. Enter your last drawn salary, your dearness allowance, and your recent commissions. In case, you don’t have a dearness allowance or a commission, enter only your last drawn salary.
2. Enter the number of years of service you have given to the company.

The software then instantly calculates your gratuity fund in no time. In case, you do not come under the first category, use a separate category gratuity calculator online to calculate your gratuity.

Benefits of the Gratuity Calculator

• Easy to use:

The gratuity calculator online is a simple device that is programmed for user convenience. You don’t have to do anything except put your figures in the software, and it calculates them in no time.

• Quick results:

It is a very time-saving affair, as it gives you your estimates in seconds. You don’t have to wait for the estimated fund, you get your figures in seconds.

• Precision:

It gives you precise results as well, and this is because it is generated by an AI.

What are the Gratuity Taxation Rules?

There are some rules regarding gratuity taxation in India, and they are as follows:

• The amount of gratuity you receive in case you are a government employee is excluded from the income tax.
• The tax-excluded gratuity amount that you claim to the employer cannot exceed 20 lakhs rupees.

It is therefore important to be careful while using a gratuity calculator online. Make sure you keep all these things in mind while calculating your gratuity estimate.

Conclusion

At times you need a gratuity calculator in India at your convenience to estimate your gratuity periodically. This will help you know the gratuity amount in case you resign or retire from your job. An easy-to-go software option could be really helpful to provide you with precise estimates. While you calculate your gratuity funds, make sure you are aware of the category you belong to.

Check the official website of Piramal Finance to understand the online gratuity calculator. You can also read their blogs on various topics and check out the products and services they offer.

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