Gratuity is a benefit which is received by an employee from his or her employer for the services offered to the organisation. Under the Payment of Gratuity Act 1972, it is an amount payable to the employees by their employer if they have worked in a company for over 5 years. Generally, it is paid at the time of retirement but can be paid even before subject to certain conditions.
According to Payment of Gratuity Act, 1972, all the employees who are engaged in factories, mines, oilfields, plantations, ports, railway companies, shops or other establishments, in which ten or more persons are employed are required to the pay gratuity to their employees.
It may be noted that the gratuity is defined as a benefit plan and is one of the major after-job perks received from an employer. It may be noted that there is no set of percentage for the amount of gratuity that an employee is supposed to receive, an employer can use a formula based approach to calculate. The payable gratuity depends upon the last drawn salary and years of service of the employee.
Calculate gratuity balance-
1. Income tax department website- You can go to www.incometaxindia.gov.in website. Look for ‘Tax Tools’ option. Now, search Gratuity from the available options. The given calculator will compute the amount of gratuity pay with respect to the input values such as assessment year, type of employer, gratuity received exempted gratuity and taxable gratuity.
2. Check with your employer- Your employer or the HR of the organisation keep the complete information of all the employees. One can approach his or her HR regarding the gratuity balance or amount.
3. Formula to calculate gratuity yourself- The formula is 15 X (last drawn salary) X (tenure of working)/26. For instance, employee X’s last drawn salary is 50,000 per month and has worked with ABC ltd company for about 30 years. So, his gratuity will be calculated as: (15 X 50,000 X 30)/26= Rs 9,37,500. In this formula, the time period of more than six months is considered as one year…..Read more>>