Gratuity

What is Gratuity?

Gratuity Meaning: It is a payment given by an employer to its employee for the given services for five or more years. It comes under the Payment of Gratuity Act, 1972, as well as the Income Tax Act, 1961. In some cases, the employees can get the gratuity earlier, such as those disabled due to accdent ot death. The amount of salary is not fixed; it is calculated on the basis of the last drawn salary and years of service.

How to Calculate Gratuity?

The gratuity calculation is done by using the gratuity formula. People prefer to calculate gratuity by using the gratuity calculator. It estimates the total amount that you will receive after working for five years continuously. You just have to simply put the necessary information, like last drawn salary and tenure, and it will calculate on its own.

The gratuity formula under the Gratuity Act is:

• Gratuity=(n*b*15) / 26

Where:
n = tenure of service in years
b = last drawn basic salary dearness allowance

The gratuity formula not covered under the Gratuity Act is:

• Gratuity ( 15*last drawn salary*tenure) / 30

Eligibility to Get Gratuity

The gratuity eligibility criteria for the payment for the employees are as follows:

• The Employee should be working continuously for a minimum of 5 years. He/She should be in service continuously, and there should be no breaks in between.
• The Employee should be earning money or a salary from the organisation as a full-time employee. He/She should not be in a temporary position or doing an internship in the company.
• Other situations make an employee eligible for gratuity, like resignation, superannuation, disablement due to some accident or disease, or death. The condition of 5 years is not applicable in the case of death or disablement.