Gratuity Calculation: What will be your gratuity for Rs 37,000 last-drawn salary after 6 years and 3 months of service?

Gratuity is a lump sum payment given by an employer to an employee who leaves the job after working for at least 5 years. Any company with 10 or more employees must provide gratuity. Even if the company's workforce drops below 10, it still has to give gratuity to eligible employees. To get a gratuity, an employee must have worked for the same company for at least 5 years without any breaks. On that note, let’s find out your gratuity amount with Rs 37,000 last-drawn salary and 6 years & 3 months of service. 

Understanding gratuity

Gratuity is a one-time payment made by an employer to thank employees for their long-term service. To get this payment, an employee must have worked continuously for the company for at least 5 years. The Payment of Gratuity Act, of 1972, makes sure that employers make this payment. If an eligible employee passes away, their family member will receive the gratuity payment instead.

How many years of service are required for gratuity?

The employees must have completed a continuous 5 years of service period. This includes service that is uninterrupted by leave, accident, sickness, lockout, strike, layoff, or absence from duty without leave.

Eligibility for Gratuity: What you need to know

To be eligible for gratuity, employees must have uninterrupted 5 years of service in an organisation. 
The organisation must come under the Payment of Gratuity Act, of 1972.

Who is eligible for gratuity?

Gratuity is payable not only at the time of retirement but also in various situations. Such as:

• Superannuation
• Termination
• Resignation
• Death or disablement

Gratuity rules for companies

Organisations employing 10 or more individuals over the past years and following the Payment of Gratuity Act, of 1972, are required to pay gratuity. 

How to calculate gratuity service years

You must complete at least 5 years of uninterrupted service to get gratuity. Even if someone has completed 6 months of service, it will be counted as a full year. 

What are the factors that determine the gratuity amount?

The number of years and the last-drawn basic salary of an employee can be used to calculate the gratuity amount.

Can a company opt out of the Payment of Gratuity Act?

If a company falls under the Payment of Gratuity Act, of 1972, it cannot count itself out. 

Tax on gratuity

Any employee under the state government, central government, or local authority receives a gratuity amount, the amount is fully exempt from Income Tax.
In the case of any other salaried individual receiving a gratuity amount from an employer who falls under the Payment of Gratuity Act, the following amount is exempt from tax. 15 days' salary as per the last drawn salary of the individual

Gratuity Calculation Formula

(Last Drawn Salary x Number of Years of Service) X 15/26
Here 15 refers to 15 days’ wages per year, and 26 refers to 30 days in a month excluding Sundays.

Gratuity calculation for Rs 37,000 as last-drawn salary and 6 years and 3 months of service

Applying the formula = (Last Drawn Salary x Number of Years of Service) X 15/26
37,000x6x15/26 = 1,28,077
The estimated gratuity amount of the individual will be Rs 1,28,077.

(Disclaimer: Our calculations are projections and not investment advice. Do your due diligence or consult an expert for financial planning)