How much gratuity will be received on the basis of basic salary of Rs 35,000 after 7 years of service, check the calculation

The government has recently changed the rules related to gratuity! However, this rule is about tax on gratuity! The limit of tax free gratuity up to Rs 20 lakh has now been increased to Rs 25 lakh! This is the amount that the employee gets from the organization or employer!

It is mandatory for the employee to work with the employer for at least 5 years. Usually this amount is given when an employee leaves the job or retires.

Even if the employee dies due to any reason or leaves the job due to an accident, he or his nominee gets the amount of gratuity! So let us know how gratuity is calculated! And what is gratuity, let us know about this in detail…..

Employee Gratuity – Eligibility for Gratuity

According to the rules of the Gratuity Payment Act 1972, the maximum amount of gratuity to be paid can be up to Rs 25 lakh! For gratuity, it is mandatory for the employee to work in the same company for at least 5 years! If the employee works for less than this period, he is not eligible for gratuity!

Gratuity is not paid even if one leaves the job within 4 years and 11 months. But this rule does not apply in case the employee leaves the job due to sudden death or accident.

Let us tell you that the company gives gratuity to its employees! For this, it is necessary to work in the same company for 5 consecutive years! However, in case of death or disability, it is not necessary to complete 5 years of service to be given gratuity amount! The maximum limit of gratuity is Rs 20 lakh!

Employee Gratuity Calculation – How is gratuity calculated

Total gratuity amount = (Last salary) x (15/26) x (Number of years worked in the company)

Understand with an example – Suppose you have worked in the same company for 7 years! If your last salary is Rs 35,000 (including basic salary and dearness allowance)! Then the calculation will be like this –

35000 x 15/26 x 7 = Rs 1,41,346! This means you will be paid Rs 1,41,346!

Employee – What does 15/26 mean in calculation?

Gratuity is calculated on the basis of 15 days in a year. Whereas, only 26 days are counted in a month. Because it is believed that there are 4 holidays. An important point in gratuity calculation is that if an employee works for more than 6 months.

So it will be calculated as one year! If an employee works for 7 years and 7 months! Then it will be considered as 8 years! And on this basis the amount of gratuity will be calculated! Whereas, if someone works for 7 years and 3 months! Then it will be considered as 7 years only!

Employee Gratuity – Two categories of gratuity

In the Gratuity Payment Act 1972, employees have been divided into two categories to decide the formula for the amount of gratuity to be paid to the employees. The first category includes those employees who come under the purview of this Act. While the second category includes those employees who are outside the Act. Both private and government employees come under these two categories.

Category 1 – Employees who are covered under the Payment of Gratuity Act, 1972.

Category 2 – Employees who are not covered under the Payment of Gratuity Act, 1972.

Formula for determining the amount of gratuity (for employees covered under the Act)

Last Pay x Length of Service x 15/26