Being a salaried employee, if you worked with the company, minimum for 5 years, as per the Payment Gratuity Act of 1972, you become liable for gratuity. It is also known as a gratuity amount. The gratuity never reflects on your salary amount. It is settled when you leave or taken an exit from the company.
n is Tenure of service completed in the company
b is (Last drawn basic salary + dearness allowance)
For example : , if you have worked for a company for seven years, the organization is not covered under the Gratuity Act. And your basic salary was Rs. 35,000.
Gratuity Amount = (15 × 35,000 × 7) / 30 => 1,22,500.
A gratuity calculator helps in determining the gratuity amount you are liable to receive. It works both for employer and employee as well. We all know that gratuity amount calculation manually is a tedious process, but with the help of an online gratuity calculator, you can get quick results, just with a click of the mouse. Online, there are many financial institutions available where you can use a gratuity calculator free of cost and anytime you want. The best part about the gratuity calculator is that apart from the employer, you can also calculate your gratuity. The chance of error becomes less.
The amount of gratuity received by any government employee (whether central/state/local authority) gets exemption from Income Tax. If you are a private employee whose employer is covered under the Payment of Gratuity Act, there are three amounts of getting tax exemptions. For example, your employer had paid you a gratuity of Rs 12 lakh. As per the gratuity calculation in the earlier example, you are eligible for a gratuity amount of Rs 2,59,615. The government has kept Rs 20 lakh, the upper tax-free limit. The lowest of the three figures is Rs 2,59,615, which gets tax exemptions. It is mandated to pay tax on the remaining amount of Rs 9,40,385 as per your income tax slab.