Gratuity Rule 2025: Those earning 35 thousand salary will get gratuity of Rs 1,41,346, employees should understand the calculation

News, Digital Desk- (Gratuity Calculation) Recently, the government has changed the tax rules related to gratuity. Now gratuity up to Rs 25 lakh instead of Rs 20 lakh will be tax-free (Employer). 

This amount is given to the employee by his employer (company). To get this benefit, it is mandatory for the employee to work in the same company for at least 5 years. (Employees Update)

Usually this amount is given when an employee leaves the job or retires. Even in the event of the employee's death due to any reason or leaving the job due to an accident, he or his nominee (Gratuity nominee) receives the gratuity amount.

What is the eligibility for gratuity?

Under the Gratuity Act 1972, the maximum gratuity amount is Rs 25 lakh. To be entitled to gratuity, it is mandatory for the employee to work for at least 5 years in the same company. If an employee leaves the job even after 4 years and 11 months, he will not get gratuity. However, this 5-year condition does not apply if the employee leaves the job due to death or accident.

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

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 worked in the same company for 7 years. If your last salary is Rs 35000 (including basic salary and dearness allowance), then the calculation will be something like this -

(35000) x (15/26) x (7) = Rs 1,41,346. This means that you will be paid Rs 1,41,346.

What does 15/26 mean in calculations?

Gratuity calculation is done on the basis of 15 days per year, in which 26 working days are counted in a month (4 days as leave). An important rule is that if an employee works for more than 6 months, it will be counted as a full year. For example, 7 years 7 months of service will be considered as 8 years, while 7 years 3 months will be considered as 7 years.

Gratuity is decided in two categories-

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 employees outside the Act. Both types of employees working in the private and government sectors are covered in these two categories.

Category 1-

Employees who come under the purview of Gratuity Payment Act 1972.

Category 2-

1. Employees who are not covered under the Gratuity Payment Act 1972.
2. Formula to calculate the amount of gratuity (for employees covered under the Act)
3. Last salary x Period of employment x 15/26