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Wednesday, September 26, 2012

Gratuity Calculator and Calculation of Exemptions from Tax

Gratuity is the payment  made for the past services of the  employee by the employer. Calculation of gratuity is very easy , however many people are confused while calculate the value of gratuity and income tax thereof.
Gratuity received by an employee on his retirement is taxable under the head Salary .
Gratuity is divided into three parts for easily understand.
 Government employee and employee of local authorities.
Under this head the entire amount received of gratuity is free from tax.

Employee covered under the Payment of Gratuity Act, 1972
In this head the minimum of the following is exempt from tax
1-      Amount of gratuity received.
2-      Half month salary of every completed year.Completed year will be treated more than 6 months out of year.
3-      Rs. 350000.
Other employees not covered under the Payment of Gratuity Act, 1972
In this head the minimum of following is exempt from tax.
1-      Actual amount of gratuity received.
2-      Half month average salary for every year completed.
3-      Rs. 350000.

In all condition salary means Basic Salary + D.A
Gratuity = Salary on retirement x 15/26 x No. of years of service
for download gratuity calculator go to
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