Gratuity is a retirement benefits scheme given to the employee who will complete minimum 5 years of service in an establishment. Gratuity act 1972 will be applicable for every organization which employs more than 10 employees. Here you can know complete details about payment of gratuity act 1972 calculation & how to calculate gratuity after 5 years.
Gratuity calculation formula with example:
Gratuity is calculated on basic salary + dearness allowances. . Gratuity will be paid to the employees who will complete a minimum of 5 years of service. But in death cases, the nominees of the employee will get gratuity even before 5 years of service.
Gratuity Calculation Online Formula (Or) Gratuity Calculation Formula :
(Basic Salary +DA) x 15 x No. Of Years Of Service/26
For an example, if an employee basic salary is 6000 Rs and he completes a continuous service of 6 years in an establishment then the amount of gratuity he will get will be calculated on below gratuity calculation formula.
Gratuity = 6000 x 15 x 6 / 26 = 20769 Rs
Important Points In Gratuity Act 1972
Gratuity will be paid only after termination of job i.e whenever employee retires from his / her job or whenever he leaves the establishment.
Gratuity amount which employer pays to the employee is non taxable, so there is no tax deduction on gratuity amount.
If gratuity amount is more than 10 lakhs then that amount is taxable. The government of India is planning to increase this amount to 20 lakhs.