Toolerz Gratuity Calculator is a free online tool designed to help employers and employees calculate the amount of gratuity payable to an employee at the end of their employment period.

Gratuity is a statutory benefit in India, governed by the Payment of Gratuity Act, of 1972.

The amount is paid at the time of retirement, resignation, or termination, provided the employee has completed at least five years of continuous service with the same employer.

The gratuity amount is calculated based on the employee's last drawn salary and the number of years of service.

How to Use Our Tool

Calculating gratuity manually is a difficult job, instead, you can use our free online gratuity calculator.

Follow the below steps to use our tool.

STEP 1: 

Enter our website's home page www.toolerz.com and search for Gratuity Calculator in the search bar.

Click on the dropdown and enter the page.

STEP 2: 

Enter the basic details like "Last salary drawn" and "no. of years worked" for that particular company.

STEP 3: 

Hit the calculate button to get the Gratuity amount.

Gratuity Calculator Formula

The formula for calculating gratuity under the Payment of Gratuity Act, of 1972, is as follows:

For employees covered under the Act:

Gratuity=Last Drawn Salaryx15/26xNumber of Years of Service

Where:

Last Drawn Salary = Basic Salary + Dearness Allowance (DA)

15/26 represents 15 days' salary for each year of service, with 26 working days in a month.

For employees not covered under the Act (those in the unorganized sector or certain other cases), the formula may vary, but a common approach is:

Gratuity=Last Drawn Salaryx1/2xNumber of Years of Service

Example

Let us understand thee gratuity calculator with an example.

Gratuity Calculation for a Private Employee

Assume an employee has worked for a private company for 10 years, with a last drawn monthly salary (Basic + DA) of ₹50,000.

Gratuity=50000x15/26x10

Gratuity=2,88,450

Gratuity Calculation for a Government Employee

Consider a government employee who has served for 15 years, with a last drawn monthly salary of ₹70,000.

Gratuity=70000x15/26x15

Gratuity=6,05,085

15/26 Rule in Gratuity Calculation

The 15/26 rule is a critical component of the gratuity calculation formula under the Payment of Gratuity Act, of 1972.

It essentially means that an employee is entitled to 15 days' salary for each completed year of service, with a month considered to have 26 working days (30 days - 4 Sundays).

This rule ensures a fair calculation of the gratuity amount, taking into account the number of working days typically considered in a month.

Dos and Don'ts of Gratuity Calculation

Dos

1. Do ensure accurate input of the last drawn salary: Include only the basic salary and dearness allowance.

2. Do verify the total years of service: Round off to the nearest full year if needed.

3. Do check for any specific employer policies: Some companies might have additional rules.

4. Do keep track of changes in the Payment of Gratuity Act: Ensure compliance with the latest legal requirements.

Don'ts

1. Don't include allowances other than DA: Housing allowance, travel allowance, etc., which should not be included in the last drawn salary.

2. Don't calculate for less than five years of service: The minimum requirement is five years of continuous service.

3. Don't ignore partial years: If the service period includes more than six months, round it up to the next year.

4. Don't use outdated calculators: Ensure the calculator is up-to-date with current laws.

Gratuity Calculator in Excel

Creating a gratuity calculator in Excel is a practical approach for HR departments and individuals. Here’s a step-by-step guide:

1. Open Excel and Create a New Worksheet.

2. Label the Columns: Enter labels such as "Last Drawn Salary", "Years of Service", and "Gratuity Amount".

3. Input Formula: In the Gratuity Amount column, input the formula based on the 15/26 rule. $=B2x(15/26)xC2$ Where B2 is the cell with the last drawn salary, and C2 is the cell with the years of service.

Calculation: Excel will automatically compute the gratuity amount based on the input values.

For additional financial calculations, try our Interest Calculator to compute interest on savings and investments.

Eligibility Criteria for Gratuity

Minimum Service: An employee must have completed at least five years of continuous service with the same employer.

Types of Employees: Both private and government employees are eligible, provided they meet the minimum service requirement.

Conditions for Payment: Gratuity is paid upon retirement, resignation, termination, death, or disablement due to an accident or disease.

What are the Eligibility Criteria for Payment of Gratuity?

Gratuity is a lump sum benefit paid by an employer to an employee as a token of appreciation for their service. To be eligible for gratuity payment, the employee must meet certain criteria under the Payment of Gratuity Act, 1972 (in India):

1. Minimum Service: The employee must have completed at least 5 years of continuous service with the same employer.

2. Type of Employment: It applies to full-time employees in organizations with 10 or more employees.

3. Reason for Termination: Gratuity is paid upon retirement, resignation, death, disability, or termination (except for disciplinary reasons).

In case of the employee's death or disability, the 5-year rule is waived.

Gratuity helps employees build a secure financial future post-employment. Understanding these eligibility criteria ensures you know your rights and can plan your career and retirement better.

What is Rule 7 of Gratuity?

Rule 7 of the Payment of Gratuity Rules, 1972, outlines the procedure for an employee to apply for gratuity.

According to this rule, an employee eligible for gratuity must submit an application in Form 'I' to their employer within 30 days from the date it becomes payable.

If the employee is unable to apply personally, a nominee or legal heir can also apply using Form 'J' or 'K', respectively.

Even if there is a delay in submission, the employer is expected to process the application, provided there is a valid reason for the delay.

This rule ensures a formal process for claiming gratuity and protects the rights of employees after retirement, resignation, or in case of death.

Understanding Rule 7 is essential for timely gratuity claims and smooth retirement benefits.

Applications of Gratuity Calculator

A gratuity calculator is a valuable financial tool designed to help employees estimate the lump sum amount they are eligible to receive at the end of their service.

 It is widely used in both private and public sectors to plan retirement benefits more effectively. By entering basic details like last drawn salary and years of service, individuals can quickly get an accurate gratuity estimate.

This tool is especially useful for human resources departments, financial planners, and employees nearing retirement.

 It aids in long-term financial planning by providing clarity on post-employment benefits. Additionally, it ensures transparency and helps in understanding the factors that influence gratuity payouts, such as duration of service and company policies.

For additional financial planning tools, don’t forget to explore our Car Loan Calculator, designed to help you calculate loan repayments with ease.

Frequently Asked Questions (FAQs)

Q1. What is a Gratuity Calculator?

Ans: A Gratuity Calculator is a tool that helps employees estimate the amount of gratuity they will receive when they leave a job after working for a certain period. It is based on salary, years of service, and company policies.

Q2. Is gratuity taxable?

Ans: ✔ If received from a government job: Fully tax-free.

✔ If received from a private job: Tax exemption is available under Section 10(10) of the Income Tax Act, with a maximum limit.

Q3. What happens if I switch jobs before 5 years?

Ans: If you leave before 5 years, you do not qualify for gratuity unless your job was terminated due to illness, disability, or death.

Q4. What is the formula used in a Gratuity Calculator?

Ans: The common formula is: Gratuity = (15 × last drawn salary × years of service) ÷ 26 This formula is for employees covered under the Payment of Gratuity Act in India.

Q5. Is it free to use a gratuity calculator?

Ans: Yes, most gratuity calculators available online are completely free and easy to use. You don’t need to sign up or pay anything  www.toolerz.com .

Q6. Is the gratuity amount shown by the calculator final?

Ans: The amount shown is an estimate. The actual gratuity you receive may vary slightly depending on your company's policies, taxes, or changes in your final salary details.

Q7. Are gratuity calculators free to use?

Ans: Yes, most gratuity calculators are free to use. Many online calculators let you input your salary and service details to estimate your gratuity without any charge.

Q8. Who is eligible to receive gratuity?

Ans: You are eligible for gratuity if you have completed at least 5 years of continuous service with the same employer. Some exceptions apply in case of death or disability.

Q9. Why should I use a gratuity calculator?

Ans: It gives you a quick and accurate estimate of your gratuity amount. This helps in financial planning and understanding what to expect when you retire or resign.

Q10. Can I use the calculator if I work in the private sector?

Ans: Yes, the calculator works for both private and public sector employees, as long as the gratuity rules apply to your job.