Gratuity Calculation Confusion: How Do You Round Years for Accurate Results?

Dear All,

I have a doubt in Excel for Gratuity Calculation. Is it correct that if anyone completes 5 years and 7 months, we calculate 6 years for the Gratuity Calculation, and if someone completes 10 years and 4 months, we calculate 10 years for the Gratuity Calculation?

Now, my question is, I need the exact formula for the above situation.

Thank you & Regards,
pm44

Dear Member,

Please go through section 4 of The Payment of Gratuity Act, 1972 for your query.

With Regards,
R.N.Khola

Sir,

Please advise how the Gratuity calculation is done. Is it taxable when an employee leaves after working for at least 5 years? Is the same taxable?

Thanks,
Upasana

Till date, gratuity up to 3.5 lakh for the private sector and Rs. 10 lakh for the government sector is not taxable. The government is also planning to increase the limit from 3.5 lakh to 10 lakh for private sector employees. You can also search the forum for other questions; you will find numerous answers to your queries.

Best regards,
Sanjay

If I have 15 years of service and have 6 months' approved leave without pay during that period, will my number of completed years be considered 14 years? That is, what is the status of leave without pay? Is it considered a part when calculating the completed number of years?

Gaurav

Solution for Gratuity Calculation

Many companies are conducting the aforementioned calculation, such as 5 years and 3 months, which means gratuity is calculated for 5 years. If the organization has a union, they must provide the exact completion period for the employer.

One year of gratuity = 15 days of basic pay.
One month of gratuity = 15 / 12 or 1.25.
Now, you can calculate for the exact remaining months.
Basic pay = 6500.
Number of years of experience = 6 years and 8 months.
One year = (6500 / 26) * 15 = 3750 or one month = (6500 / 26) * 1.25 = 312.50.
One year = 12 * 312.50 = 3750.
6 years of gratuity = 6 * 3750 = 22500.
8 months of gratuity = 8 * 312.50 = 2500.
Gratuity for 6 years and 8 months is 25000 (or 6 years and 8 months can be considered as 7 years).
Formula = ((Basic + Dearness Allowance) * number of years of experience) * 15 / 26 = 6500 * 7 * 15 / 26 = 26250. In this case, the management provided more money to the employee.