Gratuity calculation: It is calculated on the basis of whether the employer is covered under the Gratuity Act. It is tax free for government employees.
If you are salaried then you must have heard about Gratuity. This is part of your salary. Although it is part of the retirement fund, but with some conditions it can be withdrawn even before that. The first condition of the gratuity is that the employee has worked in an institution for at least five years.
According to the rule, if an employer delays the gratuity payment, the employee will get the benefit of simple interest separately. Another rule with gratuity is that a maximum of 10 lakh rupees can be received from an institution as gratuity. It does not matter that the employee has worked there all his life. There is a simple calculation of how much gratuity an employee will get.
When covered under the Gratuity Act
The formula for removing the gratuity is – n * b * 15 / 26. It has ‘n’ tenure of service. ‘b’ means last basic salary plus dearness allowance. As an example, if someone’s last basic salary and dearness allowance is Rs 20 thousand and he has worked in that institution for 10 years then as gratuity (10 * 20000 * 15/26) Rs 1 lakh 15 thousand 384 Will meet. This rule will be applicable to those places which are covered under the Gratuity Act.
Not covered under Gratuity Act
If an employer is not covered under the Gratuity Act, then the removal formula is different. This is the formula- (15 * Your last drawn salary * the working tenure) / 30. Accordingly, if someone’s last basic salary and dearness allowance is 20 thousand rupees and he has worked for 10 years in that institution then the gratuity (10 * 20000 * 15/30) in the form of one lakh rupees.
Tax rules
If a government employee gets gratuity money then it does not come under the tax net. If someone does a private job and is covered under the Employer Gratuity Act, then the maximum amount up to 20 lakhs is not covered by tax.
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If DA is not given only basic is given can v calculate gratuity