Gratuity Formula: How to Calculate Gratuity in Simple Calculation-HROne

Under The Payment of Gratuity Act, 1972, Gratuity is the hunk sum amount of money that an employer pays its employees as a token of taste for the services rendered by them. Gratuity is one of the components that make up the Gross Salary of an employee. The employees are merely eligible to withdraw the gratuity come after they complete a period of 5 years in the lapp constitution .
apart from this basic information, there are multiple other queries related to Gratuity that popular in the heads of working professionals .
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Mentioned below are the 5 FAQs of graduity calculator that we have selected out of the many others:
  • Is gratuity taxable?
  • How to check the gratuity amount?
  • How to withdraw gratuity?
  • What is 15 26 in gratuity calculation?
  • How do employees make gratuity payments?

Is Gratuity Taxable?

The Income-tax Act, 1961 exempts Gratuity from tax up to a certain limit. The tax applicability depends on the nature of the employee ’ sulfur subcontract who earns the gratuity. There are three cases :

  • The gratuity provided to the government employees (central, state or local) is exempt from tax 
  • Other eligible employees whose employers are covered under The Payment of Gratuity Act,1972, their last drawn salary of only 15 days is tax exempt
  • For the rest whose employers are not covered under The Payment of Gratuity Act,1972, the least of the their gratuity amounts will be exempt from tax:
  • INR 20 lakhs
  • The actual gratuity amount received
  • Salary of half month for every year of employment that the employee has completed with the company  

How To Check Gratuity Amount?

An employer has different ways to show gratitude to the employees for their extraordinary service and hard function during the period of employment. One such profit offered to the work force is by giving away the gratuity sum .
gratuity can lone be withdrawn after the completion of minimum five years in the same organization, at the meter of leaving or retirement from the job. In some places, people used to use graduity amount or graduity calculation alternatively of graduity measure or graduity calculation
Under The Payment of Gratuity Act, 1972, gratuity is calculated as 4.81% of the Basic Pay .
The simplest formula to calculate Gratuity earned by an employee using CTC sum is as follows :
Gratuity = 15/26 * Last Drawn Salary (Basic Salary + Dearness Allowance) * Number of Completed Years of Service
now you can immediately check your gratuity sum using HROne ’ randomness
automated gratuity calculator ( graduity calculator ) :

Gratuity Calculator

basic pay
Dearness Allowance ( D.A )
Number of years of Service


How To Withdraw Gratuity?

4.81 % of the employees ’ basic Pay is deposited by the employer into the Gratuity bill every year. This amount matures when the employee completes 5 years of service in the same administration. In order to be able to withdraw the Gratuity sum, the eligible employee must either leave the organization after the completion of 5 years or he/she can make the coitus interruptus at the time of retirement. In any other case, no company would allow the coitus interruptus of gratuity .
If you wish to know about The Payment of Gratuity Act, Forms, Eligibility and more in detail, read this blog : hypertext transfer protocol : //

What Is 15 26 In Gratuity Calculation?

In the formula to calculate gratuity come, i ,
Gratuity = (15/26)*A*B 
where A is the full no. of years served in the company
and B is last draw wage

here, 15 being wages for 15 days
and 26 being the number of working days in a month .

How Do Employers Make Gratuity Payments?

Employers either pay the gratuity sum to their employees from their personal accounts or a general gratuity policy plan with a service provider. They then pay annual contributions to the serve providers who, in flex, pay the gratuity to the eligible employees. 4.81 % of the Basic Pay of employees ’ salaries is contribute towards the gratuity funds every month by the employer. Policies, rules, and regulations are specially taken worry of while making this payment .

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