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November 30, 2022

Itax Software

Income Tax Software

How to calculate Gratuity amount with Formula + Gratuity Calculator in Excel


Gratuity is the
payment made by the employer to his ex- employee for his past services.
Gratuity is similar to a  gift given by employer for appreciation of past
services of his employee . The technical definition of gratuity given by ICAI
is “gratuity is a  voluntary payment made by an employer  in
appreciation of services rendered by employee .

Who is eligible for Gratuity ?

As per Payment of
Gratuity Act  1972, any employee who has been in
 continuous service
for 5 years
 is eligible for
gratuity .
During the above
mentioned 5 years , employee is eligible for casual leave and sick leave
without affecting his eligibility.

In case of death of
an employee , the above condition 5 Years of continuous service is not
 i.e. even if an
employee dies
after 2 years of
service , he/she is still eligible for gratuity .

 How is gratuity calculated? Gratuity calculation formula for
employees receiving monthly salary
 (15/26) * Last Salary Drawn * Completed
years of service

When calculating completed
years of service
 , if an employee
worked for more than 6 months , it will be considered as full year .
Example : Employee
worked for 14 years and 7 month , then completed years of service = 15 years
Example: Employee
worked for 14 years and 5 months ,then completed years of service = 14 years
Example: Employee
worked for 14 years and 6 months, then completed years of service = 14 years
Last salary drawn =
basic salary + dearness allowance

Maximum Amount of Gratuity

The amount of gratuity cannot
exceed Rs 10,00,000 (10 lacs) .
 Even if it exceeds , maximum
amount payable by employer shall be Rs 10,00,000/-

When is Gratuity Payable ?

Gratuity is Payable on
employee’s Supernnuation , Retirement Or death (whichever is earlier).

Download the Gratuity Calculator as per the Gratuity Act 1972

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