Gratuity Calculator
Calculate gratuity for your employees with ease.
Gratuity Amount
₹1,44,231
What is Gratuity?
Gratuity is a financial benefit that employers offer to their employees, as a sign of appreciation for the number of years the employees have served a company. Gratuity encourages employees to serve for longer periods and lowers employee turnover in an organisation.
Employers benefit their employees with a gratuity fund after years of service to the same company. Employers offer gratuity as a token of appreciation for the service employees have provided to the organization for years.
The Payment of Gratuity Act, of 1972 mandates payment of gratuity to any employee who has served the company for more than 5 years. Any organisation that has 10 or more working employees is liable to offer the gratuity benefit. Let's now move to gratuity amount calculation and how an online calculator can help with it.
How to Calculate Gratuity Amount?
Almost every corporate employee becomes curious about how to calculate gratuity for private sector employees.
Many also think that gratuity calculations are highly complex and may involve the usage of complex formulas, but in reality, it is not so. There are two major determinants of gratuity calculation - the tenure of working of an employee and their salary.
Gratuity Calculation Formula
Here is a straightforward formula for calculating the gratuity amount.
Gratuity = (Employee's last withdrawn salary including Dearness Allowance x Total number of years of employment x 15)/26
Let's understand this with an example.
Let's say that an employee's last withdrawn salary was ₹50,000 including Dearness Allowance. The employee has served for 10 years in the same company.
The gratuity payable will be: (50,000 x 10 x 15)/26 = (5,00,000 x 15) / 26 = ₹2,88,461.53
What is a Gratuity Calculator?
A gratuity calculator is an online tool, mainly designed to simplify the entire process of calculating the actual value of gratuity. Mostly, employees as well as employers find it challenging to calculate the final value of gratuity because of complex calculations, such as deciding which salary items to include and exclude during calculations. All of these issues are troubleshooted with a gratuity calculator online.
This online device quickly calculates the end gratuity based on the last drawn salary and overall years of service the employee has provided. Gratuity calculators also have a highly user-friendly interface and fetch quick results, which makes them a great tool for planning the finances of the company as well as the employees.
Online platforms such as Covrzy offer an online tool for those who ask how to calculate gratuity for private sector employees.
You may also read about the top 5 government subsidy loans for business in India here.
Features of an Online Gratuity Calculator?
There are multiple features of an online gratuity calculator, let's overview them now:
- User-Friendly Interface: Gratuity calculators are designed to make the user experience highly unique and free of any interruption. This is the reason why a user-friendly interface has been adopted for these calculators.
- Instant Results: A user can immediately get the accurate gratuity amount, which enables them to know how the tenure of service affects gratuity.
- Variable testing: Many users often wish to check out the final result by inputting different salary brackets or years of service. An online tool offers the provision for testing out how changing these variables affects gratuity amount calculation.
- Mobile Compatibility: Indians on average use smartphones daily for 4.77 hours, so mobile compatibility becomes an essential factor here. Gratuity calculators are designed in a way that is compatible with mobile users highly for users to use it on the go.
How to Use Covrzy's Gratuity Calculator Online?
Here are the easiest steps you can take to use Covrzy's Gratuity Calculator quickly:
- Step 1: Visit Covrzy's gratuity calculator online here
- Step 2: Enter the last drawn salary as CTC in the calculator
- Step 3: Input the number of years of employment
- Step 4: In the final step, click the "Calculate" button
- Step 5: The calculator will immediately show the gratuity amount, along with a complete breakdown of the calculation.
Benefits of Using a Gratuity Calculator in India
A gratuity calculator has a range of benefits to offer:
- Accuracy: An online calculator provides accuracy in calculation unlike human calculation, which can be flawed.
- Time-Saving: One can check their gratuity amount on the go instead of wasting time in deducing it by complex calculations
- Financial Awareness: Employees are financially more aware of their rights and entitlements by using a gratuity calculator.
- Planning for Retirement: Employees can plan their retirement as well as design their financial plan way better with an online gratuity calculator.
- Compliance: A gratuity calculator is also beneficial for employers. An employer can assess the gratuity they are liable to pay, and ensure that the organization is complying with the Payment of Gratuity Act.
Conclusion
This blog sums up all the answers to the common question, "How to calculate gratuity for private sector employees". A gratuity calculator makes the entire calculation process highly easy, assuring accuracy and bringing in transparency by complying with legal laws. Covrzy's Gratuity Calculator can assess gratuity entitlements and let individuals strategize their financial planning accordingly.
Taxation Rules for Gratuity
For gratuity claims in India, the taxation rules differ based on the employee's role and position.
- In the case of a government employee, the gratuity claim is exempted from any income tax.
- In the case of a private sector employee, if the organization is eligible for providing gratuity, the least of the three amounts will not have to pay any income tax:
- i) ₹20 lakh
- ii) Actual gratuity amount claimed
- iii) Eligible gratuity amount
Frequently asked question
What is the maximum gratuity amount payable in India ?
A company which is covered under the Payment of Gratuity Act is liable to pay ₹20 lakh as the maximum amount.This is, however, applicable to only those employees who have worked in the same company for a minimum of five years continuously.
Is gratuity taxable in India ?
Can I claim gratuity if I leave before five years ?
Do you have more questions?
For more queries related to GST calculations, tax compliance, and business taxation, ask your queries and get your doubts clarified.
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