If you are a salaried person and work in the same company for a long time, then gratuity can become a big support for your future. It is a retirement benefit that is given on the basis of your last salary and job duration. Gratuity acts as a financial security shield for you, not only after retirement but also when you change jobs. According to the ‘Gratuity Payment Act, 1972’, its maximum limit has been fixed at ₹ 20 lakh.
What is gratuity, and why is it important
Gratuity is an amount that the company gives to its employee in recognition of their long and faithful service. It is a kind of retirement benefit that gives financial support to the employee for their future. Especially for those employees who work under EPF (Employees Provident Fund), they start getting its benefits after completing 5 years of continuous service. This amount not only helps financially after retirement, but also acts as a financial security cover for you in case of a job change.
Easy calculation of gratuity
Gratuity is calculated using a simple formula:
Last salary × 15/26 × total years of service
Here, ‘last salary’ means your basic salary and dearness allowance (DA) combined. 26 working days are considered in a month, as there are an average of 4 holidays.
Understand the complete calculation with an example
Let us understand this with an example:
Suppose your last basic salary + DA is ₹ 50,000, and you have worked in the same company for 10 years.
Gratuity = ₹50,000 × (15/26) × 10
Gratuity = ₹50,000 × 0.576923 × 10
Gratuity = ₹2,88,461.50
That is, for 10 years of service on a salary of ₹50,000, you will get gratuity of around ₹2,88,461.
If your last salary is ₹55,000 and your years of service are 10, then your gratuity can be up to ₹3.17 lakh.
Why is gratuity so special
It acts like an emergency fund for you. It is a recognition of your loyalty and hard work towards the company. The gratuity calculator helps you in making long-term financial plans.
You can use the gratuity calculator at home to know how much gratuity you can get on leaving the job, retirement, or any other situation. This not only saves your time but also helps you manage your money better.