Gratuity Calculator: Check The Formula For Gratuity Calculation Online

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Gratuity is a corpus directed to be given to all employees by organization employing more than ten people in a financial year. Once an organization comes under this provision, it cannot stop paying gratuity even if the number of people goes below ten. You are entitled to receive gratuity payment, irrespective of whether you are in a government organization or a private company, provided your employer is a gratuity payer. Some start-ups form gratuity a part of the salary package to increase the saleability of the job even if they are not required by law to pay gratuity.

As a salaried person who probably has corporate or government income as the major source of inflow, it would be wise to keep a track on how much gratuity you have accumulated and how much will you receive at the end of your working life. 

A good gratuity calculator should allow you to make the selection as per your type of organization. There are two formulae –

  • This formula is applicable to you when your organization falls under the Payment of Gratuity Act, 1972.  According to this formula, 

Gratuity = Previous salary before leaving x (15/26) x Total No. of years worked

It counts 26 days as a working month with 15 days (half month) salary counted for gratuity calculation. 

  • This formula is applicable if your organization does not require to pay for gratuity but you are paid gratuity as part of your package. Here,

Gratuity = Previous salary before leaving x (15/30) x Total No of years worked

Here the month is accounted as 30 days.

Online calculators will require you to select either of these conditions and give you a result. A gratuity calculator will give you an approximate idea of the amount you will receive on your retirement.

Also, Read This: What Are All the Types of Bank Deposits?

Final Gratuity Amount Paid

However, this amount can vary depending upon the agreement between the employer and employee. The lowest of the three values are paid out as overall gratuity–

  1. Rs. 20 lakhs,
  2. Calculation of the above formulae,
  3. A pre-decided amount in the package. 

Finding the right investment post-retirement to grow your gratuity money 

Once you have received your gratuity amount from your employer, it is time to invest it wisely. As a senior citizen, you can choose from some very interesting choices which will not only keep your money safe but earn good returns. Some of the most sought after options are as follows –

  1. Fixed Deposits 
  2. Senior Citizen Saving Schemes 
  3. Mutual funds
  4. Company Fixed Deposits 

After retirement, the safety of EPF and PPF is over as the designated time period is up. You can best think of earning from the interest rates in the above instruments. Mutual funds are the riskiest of these. Senior Citizen Saving Schemes interest rates are changed every quarter as per government directives. 

You have company FDs as the best option with higher interest rates than bank FDs. They give 1-2% higher rates than bank FDs. Bajaj Finance FD offers one of the best rates with the assurance of the safety of your deposit. It is the one most highly rated company FDs with a high credit rating from ICRA and CRISIL. Senior Citizens are most benefited with 8.95% interest rates and a return on investment of 54% for 5 years on Senior Citizen FD from Bajaj Finance.

Thus, your gratuity fund has a trusted and guaranteed investment instrument ready to invest in.


Aman is working in the domain of Investment management in one of the top universities. He has published research papers and case studies in Investment and FD.
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