Understanding Gratuity: How Do You Calculate It Based on Your Salary and Service?

How to Calculate Gratuity?

To calculate gratuity, you can use the following formula:

Gratuity = (Last drawn salary x 15 days x Number of years of service) / 26

In this formula:
- Last drawn salary refers to the basic salary plus dearness allowance that you were receiving before leaving the job.
- The factor of "15 days" represents half of the monthly salary.
- The factor of "26" represents the number of working days in a month.

It's essential to understand your organization's gratuity policy and any specific rules or calculations they follow when determining the gratuity amount for employees.

Gratuity is calculated as (Basic + DA) / 26 * 15 * number of completed years of service.

15 is 15 days' wage for every completed year of service. It is applicable after 5 continuous years of service.

Any employee working in an organization for more than or equal to 5 years is eligible for gratuity, which is paid only upon retirement or separation through resignation or termination, along with their full and final account. It is calculated as (Basic)/26*15* number of completed years of service. In other words, the employee is compensated for an additional 15 days for each completed year of service. If the partial duration exceeds 6 months, it is considered as a full year; if it is less, it is treated as null.

Gratuity is calculated as follows:
15/26 x pay (basic + DA) x number of years of service. Periods over six months are treated as one year.

Gratuity = Monthly Salary (Basic + DA) x 15 days x No. of years of service

(Max. Gratuity payable under the Act is Rs. 3,50,000/- * Please confirm it, This is exempted from tax if drawn after retirement or leaving the job.)

Completed years of service: More than 6 months of service will be counted as a full year of service, i.e., 1 year 7 months will be counted as 2 years.

Hi,

If I work less than 5 years in any company and join another company which also offers gratuity, can I still receive gratuity?

Please let me know if you need any further assistance.

Sumita,

No, there is an element of continuous service for 5 years with the same establishment.

Sumita,

They must return it to the employee at the time of leaving if they have made a suitable provision in their Balance Sheet in this regard.

Hi Anurag,

Can you please be more specific as to how one can get the deducted money back if he or she leaves the job before five years?

Regards,
Mehul

Hi,

Please clarify how to calculate gratuity when we split the salary only into three parts. For example, the basic is 6500, HRA is 9900, and Conveyance is 9900.

Hi,

At the time of joining, my basic was Rs. 3,500/- and now it's Rs. 12,000/-. Which one should I consider?

Anurag, your replies have helped me too. Can I know what is the maximum amount that a company can deduct per month from an employee's salary as a provision of Gratuity to be maintained in their balance sheet?

Ami

Respected All,

Please tell me, if one has completed 4 years and 8 months in the same organization, will it be considered as 5 years? Does this depend on the organization, or is it universally acceptable and legally binding?

Regards,
Pratik Khurana

I am attaching this XLS file to calculate the gratuity and also the tax liability on gratuity.

Dear Member,

Members have time and again submitted that strictly according to the Payment of Gratuity Act, 1972, an employee is not entitled to receive gratuity from the employer. However, the Honorable Madras High Court gave a judgment in 1996, reported in LLR as 1998 LLR 1072, which states that if an employee completes four years and 240 days in the fifth year as per this Act, then that person is entitled to receive gratuity from the employer. In this situation, if the employer does not consider this ruling, you can approach the Controlling Authority under the PG Act of your area by filing a claim case.

With Regards,
R.N.Khola

Eligibility for Gratuity Claim

I joined my pharmaceutical company on 02.08.2010, and after completing 5 years continuously, they discontinued my services. I just wanted to confirm if I am eligible to claim gratuity.

When I joined the organization, I was placed in the marketing department. In October 2013, I was transferred to the Distribution and Logistics department, with no service break whatsoever.

Consideration of Allowances in Gratuity Calculation

There is no provision for DA (Dearness Allowance), but I receive CCA (City Compensatory Allowance). Can CCA be taken into account while calculating my gratuity amount?

Assistance Required for Gratuity Calculation

I kindly request your assistance in calculating my gratuity amount and determining which form I need to fill out to claim it, as my organization is not releasing the same.

My Gross Salary is 60,500/- per month. My Basic Salary is 30,250/- per month, and my CCA is 6,050/- per month.

Kindly guide me on this matter. I look forward to your cooperation.

Thanks and Regards,
Amit Gautam

I think you guys also specify DA Allowances. For example, what type of payables are included in this to help people understand about gratuity.