Job-hopping can increase your pay, but good old loyalty also has its perks.
Stay on with your employer for five years or more, and you are entitled to
gratuity when you resign, retire or are retrenched. This monetary reward to be
paid by your employer in recognition of your years of service is mandated by
the Payment of Gratuity Act. Most establishments employing 10 or more workers
fall under the Act.
The amount you get as gratuity depends on the number of years you have
served and the last drawn monthly salary. Roughly, you get half a month’s Basic
and DA for every completed year of service. Here’s the formula to calculate
gratuity: (Number of years of service) * (Last drawn monthly Basic and DA)
*15/26.
How to calculate this in Excel? Please see below:
You need to
enter values only in the cells which are highlighted above.
Another positive is
the favourable tax treatment that gratuity receipt enjoys - Tax treatment.
If you are a government employee, then the entire amount you get is exempt
from tax. If you are not a government employee but are covered under the Act,
you get tax deduction for an amount which is the lowest of the following:
a) Actual gratuity received
b) 15 days Basic and DA for each
completed year of service (according to calculations in the example above)
c) Rs. 10 lakh
