The gratuity calculator will calculate the estimated gratuity amount based on the gratuity calculation formula. To calculate the gratuity amount, you would need to input the basic last drawn salary and the tenure of the current service with the organisation. Your final drawn salary will accumulate your primary salary, dearness allowances, and the commissions you would have received through the sales.
The gratuity rules say that there are two main categories to determine the calculation- one for the Employees covered under the Act and the second for the Employees who are not covered under the Gratuity Act.
1) For Employees covered under the Act:
The Gratuity calculation formula that you can use to calculate the Gratuity amount is:
Gratuity = n*b*15/26
n denotes the tenure of service an employee has completed in the organisation.
b denotes the last drawn salary plus dearness allowance.
For instance, you have worked with an XYZ organisation for a total of 15 years. Consider your last basic salary, including the dearness allowance, was Rs. 40,000. So, therefore:
The amount of Gratuity = 15 × 40,000 × 15 / 26 = 3,46,153
Two points are must be noted that:
According to the Gratuity Act, the Gratuity amount cannot be more than Rs. 20 Lakhs. The excess Gratuity amount will be considered as ex-gratia.
While calculating the tenure of service, if you have completed more than six months from your previous date of joining, then it is considered a completed year for the calculation of Gratuity. So, for example, if you have worked for 15 years and seven months, you will receive the gratuity amount for 16 years. But if you have worked for 15 years and five months, then the Gratuity will only be counted for 15 years.
2) For Employees not covered under the Gratuity Act:
Even if the organisation is not covered under the Gratuity Act, the employees would still receive the Gratuity amount. But the number of days will be changed from 26 to 30 days.
The Gratuity calculation formula is:
Gratuity = (15 × last drawn salary × working tenure)/30.
For instance, if you have worked for a company for seven years, the organisation 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.
How can a Gratuity calculator help you?
The Gratuity calculator comes in handy in several ways, a few of which are mentioned below:
- Ascertain the amount you will receive – The calculator gives you an estimate idea of the Gratuity you will receive on retirement. It helps you determine the compensation the company is providing to you for your years of service.
- Aids in better financial planning – To ensure that you are able to enjoy your retirement without the worry of finances you are likely to create a plan and make suitable investments. As you become aware of the Gratuity you will receive you are able to plan your finances and make other investments strategically.
- Obtain accurate results in no time – You do not need to spend endless hours to determine the Gratuity you will receive. Enter the key variables in the calculator and obtain accurate results in a matter of minutes.
How to use the ICICI Gratuity calculator?
Using the ICICI Gratuity calculator is simple. The calculator does most of the work for you, all you need to do is enter the right data. Enter the following key data points to determine your Gratuity value.
- Employment period – Enter your employment period with your current employer. Make sure that you feed in the precise years and months of employment, as it is a necessary requirement for accurate calculations.
- Monthly salary – Enter your last drawn salary. The amount you enter should typically be the sum of your basic pay and Daily Allowance (DA).
- Commission on sales – If you receive incentives for the sales target you achieve, they add up to your total income. Hence, you must feed in the commission on sales you receive every month in the calculator to determine the Gratuity amount.
Once you have entered all required data the calculator will reflect the estimated Gratuity value you will receive from your employer almost instantly.
Tax implications applicable to Gratuity
Like any other corpus amount you receive, tax implications apply to your Gratuity value as well. The tax applicable to you depend on the type of employer you are working for. There are two types of employers in India – government and private sector. Taxation rules differ for both.
If you are working for a government employer, the Gratuity you will receive is 100% tax-exempt.
If you are working for a private sector employer least of the following three amounts will be tax-exempt, given that your employer comes under the Payment Gratuity Act:
- Rs 20 lakh
- The actual Gratuity value received
- The eligible Gratuity
You can claim tax exemption only up to Rs 20 lakh on your Gratuity value in your professional life. You cannot exceed the maximum taxation limit.
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