1
Hi jaikumar,
Please find the attachment of Key amendments on Payment of Gratuity Act 1972
Regards
Ankita
Executive HR
“A candle loses nothing by lighting another candle.” In other words, be willing to help others and
share your knowledge and insights with others who may benefit.
From India, Patna
Please find the attachment of Key amendments on Payment of Gratuity Act 1972
Regards
Ankita
Executive HR
“A candle loses nothing by lighting another candle.” In other words, be willing to help others and
share your knowledge and insights with others who may benefit.
From India, Patna
Hi All
Prior to enactment of the Payment of Gratuity Act 1972, gratuity was considered as a gift or bounty given by the employer to express his appreciation for the services of an employee at the time of leaving the service. Since the enactment of the Act, gratuity is being increasingly looked up on as the right of the employee to his property lying in the hands of the employer to be claimed in future. However the Act, while imposing obligations on the employer, made it also clear that gratuity is subject to good conduct. Therefore it is necessary to know the basic frame work of the applicability and eligibility under the Act.
1. What establishments are covered by the Act?
The Act covers the following establishments ;
I)Factories employing ten or more workers if they are run with power or twenty or more workers without power.
2)Mines, oil fields and Plantations which are so defined under the relevant Acts.
3) Shops and commercial establishments employing ten or more persons on any day during the preceding twelve months.
However the Central Government can extend the application of the Act to any other establishment.
2. Who are excluded?
The central Government and State Government establishments are excluded from the Act
.
3. Since there is always employee turn- over, what happens if the number of employees fall below ten at any time?
As per Sec.1(3-A), once the Act applies to an establishment, it continues to apply to it even after the fall in the number below ten employees.
4. Who are covered?
Sec.2(e) defines an “employee”. All employees whether they are workmen performing manual, skilled or semiskilled, unskilled, technical supervisory or clerical work or those performing managerial or administrative functions are covered. After broad basing the definition of employee by amending the section recently, even teachers are also covered.
5. Is there any wage limit for coverage of employees?
No. The Act does not prescribe any wage limit unlike the P.F Act or ESI Act.
6. When an employee becomes eligible to claim gratuity?
An employee becomes eligible to claim gratuity on any of the following grounds after completing five years of continuous service.
I) On attaining the age of superannuation or retirement
II) On resignation
III) On death even before completion of five years and
IV) On acquiring disability due to accident or disease even before completion of five years.
7. Whether an employee who resigns or leaves the job or due to closure before completing fifth year, can also claim gratuity?
Yes. An employee who could not complete the fifth year for any of the reasons but completes four years and 240 days (8months) is considered under law as having completed fifth year also and becomes eligible for gratuity.
8. How to compute gratuity?
Gratuity is to be computed at the rate of fifteen days wages last drawn by an employee for each completed year of service and service in excess of six months to be treated as one year as per the formula given below.
Monthly wages last drawn/26 x 15 x no. of years of service
9. What is the maximum limit for payment of gratuity?
It is now Rs.10,00,000/-
10. Can gratuity be attached?
No . It cannot be attached
11. What precautions to be taken in making nomination?
i) The employee shall submit nomination in the proper prescribed form within 30 days of completion of one year of service..
ii) If employee has a family at the time of making nomination, they shall nominate only a member of their family not any one else since such nomination becomes invalid.
iii) If they have no family at the time of making nomination, they can name any person as their nominee but on acquiring family, they shall modify or change the nomination in favour of his family member.
iv) they shall duly sign the nomination form.
12. Gratuity is subject to good conduct
Gratuity does not become payable automatically but is subject to good conduct. This fact is espoused by section 4(6) of the Act.
A) The employer can forfeit gratuity either fully or partially in the following cases irrespective whether there is any financial loss or damage caused to the employer or not :
i) if the employee indulges in disorderly or riotous behavior
ii) if the employee is guilty of moral turpitude.
B) The employer can forfeit gratuity to the extent of financial loss, if it is caused by ;
i) an omission of the employee or
ii) negligence of the employee
provided the employee is found guilty of the same in either of the above cases in a domestic enquiry
13. Important obligations of the employer under the Act
a) With regard to insurance and registration
The employer has to obtain insurance cover for the gratuity that becomes payable and register his establishment with the Controlling Authority.
b) with regard to payment
i) As soon as the gratuity becomes payable, employer shall calculate the amount and keep it ready
ii) On receipt of application of the employee , they shall inform the employee in the prescribed form whether or not gratuity is payable to him
iii) If gratuity is payable to an employee, the employer shall pay it within 30 days from the date it becomes payable.
c) with regard to display on notice board
i) Employer shall display the name of the officer with designation, in bold letters in English or in the language understood by majority of employees at a prominent place, who can receive notices under the Act and rules on behalf of the employer.
ii) The employer has to display an abstract of the Act and Rules in the prescribed form in English or in the language understood by majority of employees at a prominent place.
d) with regard to nomination
Employer shall obtain nomination form from an employee who completes one year of service or any change thereof in the form prescribed under the rules
14. Important obligation of the employees
i) The employee shall make an application in the prescribed form as soon as he leaves the service so as to enable the employer to settle his claim at the earliest.
ii) He shall submit the nomination form in the prescribed form on completion of one year or intimate any change in it also in the prescribed form.
iii) He shall maintain good conduct during the tenure of his service to be eligible for gratuity.
15. Remedy against non – payment or short payment of gratuity
An employee aggrieved by either non-payment or short payment of gratuity can file an application before the Controlling Authority notified under the Act and thereafter, if any party is aggrieved by the decision of the Controlling Authority, can make an appeal to the appellate authority.
Please find the attachment
Regards
Ankita
Executive HR
“A candle loses nothing by lighting another candle.” In other words, be willing to help others and
share your knowledge and insights with others who may benefit.
From India, Patna
Prior to enactment of the Payment of Gratuity Act 1972, gratuity was considered as a gift or bounty given by the employer to express his appreciation for the services of an employee at the time of leaving the service. Since the enactment of the Act, gratuity is being increasingly looked up on as the right of the employee to his property lying in the hands of the employer to be claimed in future. However the Act, while imposing obligations on the employer, made it also clear that gratuity is subject to good conduct. Therefore it is necessary to know the basic frame work of the applicability and eligibility under the Act.
1. What establishments are covered by the Act?
The Act covers the following establishments ;
I)Factories employing ten or more workers if they are run with power or twenty or more workers without power.
2)Mines, oil fields and Plantations which are so defined under the relevant Acts.
3) Shops and commercial establishments employing ten or more persons on any day during the preceding twelve months.
However the Central Government can extend the application of the Act to any other establishment.
2. Who are excluded?
The central Government and State Government establishments are excluded from the Act
.
3. Since there is always employee turn- over, what happens if the number of employees fall below ten at any time?
As per Sec.1(3-A), once the Act applies to an establishment, it continues to apply to it even after the fall in the number below ten employees.
4. Who are covered?
Sec.2(e) defines an “employee”. All employees whether they are workmen performing manual, skilled or semiskilled, unskilled, technical supervisory or clerical work or those performing managerial or administrative functions are covered. After broad basing the definition of employee by amending the section recently, even teachers are also covered.
5. Is there any wage limit for coverage of employees?
No. The Act does not prescribe any wage limit unlike the P.F Act or ESI Act.
6. When an employee becomes eligible to claim gratuity?
An employee becomes eligible to claim gratuity on any of the following grounds after completing five years of continuous service.
I) On attaining the age of superannuation or retirement
II) On resignation
III) On death even before completion of five years and
IV) On acquiring disability due to accident or disease even before completion of five years.
7. Whether an employee who resigns or leaves the job or due to closure before completing fifth year, can also claim gratuity?
Yes. An employee who could not complete the fifth year for any of the reasons but completes four years and 240 days (8months) is considered under law as having completed fifth year also and becomes eligible for gratuity.
8. How to compute gratuity?
Gratuity is to be computed at the rate of fifteen days wages last drawn by an employee for each completed year of service and service in excess of six months to be treated as one year as per the formula given below.
Monthly wages last drawn/26 x 15 x no. of years of service
9. What is the maximum limit for payment of gratuity?
It is now Rs.10,00,000/-
10. Can gratuity be attached?
No . It cannot be attached
11. What precautions to be taken in making nomination?
i) The employee shall submit nomination in the proper prescribed form within 30 days of completion of one year of service..
ii) If employee has a family at the time of making nomination, they shall nominate only a member of their family not any one else since such nomination becomes invalid.
iii) If they have no family at the time of making nomination, they can name any person as their nominee but on acquiring family, they shall modify or change the nomination in favour of his family member.
iv) they shall duly sign the nomination form.
12. Gratuity is subject to good conduct
Gratuity does not become payable automatically but is subject to good conduct. This fact is espoused by section 4(6) of the Act.
A) The employer can forfeit gratuity either fully or partially in the following cases irrespective whether there is any financial loss or damage caused to the employer or not :
i) if the employee indulges in disorderly or riotous behavior
ii) if the employee is guilty of moral turpitude.
B) The employer can forfeit gratuity to the extent of financial loss, if it is caused by ;
i) an omission of the employee or
ii) negligence of the employee
provided the employee is found guilty of the same in either of the above cases in a domestic enquiry
13. Important obligations of the employer under the Act
a) With regard to insurance and registration
The employer has to obtain insurance cover for the gratuity that becomes payable and register his establishment with the Controlling Authority.
b) with regard to payment
i) As soon as the gratuity becomes payable, employer shall calculate the amount and keep it ready
ii) On receipt of application of the employee , they shall inform the employee in the prescribed form whether or not gratuity is payable to him
iii) If gratuity is payable to an employee, the employer shall pay it within 30 days from the date it becomes payable.
c) with regard to display on notice board
i) Employer shall display the name of the officer with designation, in bold letters in English or in the language understood by majority of employees at a prominent place, who can receive notices under the Act and rules on behalf of the employer.
ii) The employer has to display an abstract of the Act and Rules in the prescribed form in English or in the language understood by majority of employees at a prominent place.
d) with regard to nomination
Employer shall obtain nomination form from an employee who completes one year of service or any change thereof in the form prescribed under the rules
14. Important obligation of the employees
i) The employee shall make an application in the prescribed form as soon as he leaves the service so as to enable the employer to settle his claim at the earliest.
ii) He shall submit the nomination form in the prescribed form on completion of one year or intimate any change in it also in the prescribed form.
iii) He shall maintain good conduct during the tenure of his service to be eligible for gratuity.
15. Remedy against non – payment or short payment of gratuity
An employee aggrieved by either non-payment or short payment of gratuity can file an application before the Controlling Authority notified under the Act and thereafter, if any party is aggrieved by the decision of the Controlling Authority, can make an appeal to the appellate authority.
Please find the attachment
Regards
Ankita
Executive HR
“A candle loses nothing by lighting another candle.” In other words, be willing to help others and
share your knowledge and insights with others who may benefit.
From India, Patna
Thanks Ankita, Your act of sharing key information is highly appreciated. With Warm Regards, V.Govindarajan {Kannanraysoft}. Manager-Continuous Improvement. Raysoft Technologies.
Do the charitable organisations such as Hospitals and non-profit making NGOs employing more than 10 persons for discharging the functions of such organisations fall within the meaning of \"Shops & Establishments\".Please clarify. Thanks
From India, Hyderabad
From India, Hyderabad
Dear Ankita,
Co-incidently we have same name.
Would you be able to help me with foll queries.
Monthly wage last drawn = Basic + DA (or the monthly salary that is paid regardless of breakage)
What does this mean? Any employee would not get his/her claimed gratuity beyond 10 lacs or is 10 lacs ceiling amount for tax implications?
What is the tax attraction on Gratuity paid? Is it tax free in the hands of employee or we compute tax on it? If so, is the tax paid year-on-year (by computing it in the CTC calc and TDS deduction) or when we are paying the whole amount after 5 years?
Can you please clear this? I couldn't understand what do attaching the gratuity mean.
Thanks and Regards.
From India, Mumbai
Co-incidently we have same name.
Would you be able to help me with foll queries.
Monthly wage last drawn = Basic + DA (or the monthly salary that is paid regardless of breakage)
What does this mean? Any employee would not get his/her claimed gratuity beyond 10 lacs or is 10 lacs ceiling amount for tax implications?
What is the tax attraction on Gratuity paid? Is it tax free in the hands of employee or we compute tax on it? If so, is the tax paid year-on-year (by computing it in the CTC calc and TDS deduction) or when we are paying the whole amount after 5 years?
Can you please clear this? I couldn't understand what do attaching the gratuity mean.
Thanks and Regards.
From India, Mumbai
Hi Ankita,
I Am glad to meet you,Here i am trying to clear your all doubt with references and suitable examples........
How to compute gratuity
:
For employees who have completed a total service of five years and above, gratuity will be calculated on [B]last basic salary drawn [/B]divided by 26 multiplied by 15 and the whole amount to be multiplied by number of years service. (For this purpose 6 months and above can be rounded up to a full years service and less than 6 months need not be.)
For employees who have not completed a total five years of service, will be calculated on last basic salary drawn divided by 26 multiplied by 15 and the whole amount to be multiplied by number of year’s service. More than fifteen days working in a month will be considered for full month and less than fifteen days will not be considered for calculation.
CASE-1: You are covered Under the Payment of Gratuity Act, 1971:
Gratuity shall be calculated as per the below formula:
Gratuity = Last drawn salary x 15/26 x No. of years of service
Your last drawn salary will comprise your basic + DA.
For computation of gratuity, your service period will be rounded off to the nearest full year.
CASE-2: You are not covered Under Payment of Gratuity Act, 1971 Gratuity shall be calculated as per the below formula:
Gratuity = Last drawn salary x ½ x No. of years of service
Your last drawn salary will comprise your basic + DA+ commission on sales on turnover basis.
AITACHMENT OF GRATUITY Can gratuity of an employee be attached?
No. It cannot be attached. Even if where the gratuity is payable under a scheme, it squarely comes within the purview of the Payment of Gratuity Act, 1972, and, therefore, the immunity of section 13 of the Act will be available.1 Section 60(1) (g) of the Civil Procedure Code also provides that gratuity payable to an employee cannot be attached and the Civil Court cannot grant injunction restraining the employer from payment of gratuity to an employee.
References :
Calcutta Dock Labour Board and another vs. Smt. Sandhya Mitra and others, 1.985 Lab. IC 714; AIR 1985 SC 996; 1985-1 UN 767; 1985(50) FLR332.
Chrisostom vs. Federal Bank Ltd. 1993-1 LLJ 422 (Kerala High Court).
Plz.... note that normally all kind of terminal benefits of employees are protected from attatchment like this. Example
The Employees Provident Fund and Miscellaneous Provisions Act 1952 - Sec: 10 Protection against attatchment:
(1) The amount standing to the credit of any member in the Fund (or of any exempted employee in a provident fund) shall not in any way be capable of being assigned or charged and shall not be liable to attachment under any decree or order of any Court in respect of any debt or liability incurred by the member....
(2) Any amount standing to the credit of a member in the fund or of an exempted employee in a provident fund at the time of his death and payable to his nominee under the Scheme or the rules of the provident fund shall, subject to any deduction authorised by the said Scheme or rules, vest in the nominee and shall be free from any debt or other liability incurred by the deceased or the nominee before the death of the member or of exempted employee and shall also not be liable to attachment under any decree or oder of any court.
The Pension Act 1871 - Sec 11. Exemption of Pension from Attachment: No pension granted or continued by Government on political consideration or on account of past services or present infirmities or as a compassionate allowance, and no money due or to become due on account of any such pension or allowance, shall be liable to seizure, attachment or sequestration by process of any Court at the instance of a creditor, for any demand against the pensioner or in satisfaction of a decree or order of any such court.
GRATUITY AND BREAK IN SERVICE
When does Break in service constitute under the Payment of Gratuity Act?
Section 2 (c) of the Payment of Gratuity Act as amended in 1984 defines the expression 'continuous service' as defined in section 2-A of the Act. Under that section, an employee is said to be in 'continuous service' for a period if he has, for that period, been _ in uninterrupted service including service which may be interrupted on account of absence from duty without leave (not being absence in respect of which an order treating the absence as break in service has been passed in accordance with the standing orders, rules or regulations governing the employees of the establishment, lay-offs, strike or lock-out or cessation of work not due to any fault of the employee, whether such uninterrupted or interrupted service was rendered before or after the commencement of the Payment of Gratuity Act.
MEANING OF CONTINUOUS SERVICE What is meant by 'continuous service' under the Act?
The term 'continuous service' has been controversial ever since the Payment of Gratuity Act came into force in 1972. In one case, the Supreme Court has also interpreted the term which has led to the amendment of the definition by the Amended Act 25 of 1984 whereby a separate section 2-A defining continuous service was added. Again by an Amending Act 22 of 1987, the amendment was made in the definition. In order to determine as to what continu¬ous service means it is imperative to reproduce section 2-A defining continuous service which reads:
(1) "An employee shall be said to be in continuous service for a period if he has, for that period, been in uninterrupted service, including service which may be interrupted on account of sickness, accident, leave, absence from duty without leave (not being absence in respect of which an order treating the absence as break in service has been passed in accordance with the standing orders, rules or regulations governing the employees of the establishment), layoff, strike or a lock-out or cessation of work not due to any fault of the employee, whether such uninterrupted or interrupted service was rendered before or after the commencement of the Act;
(2) Where an employee (not being an employee employed in a seasonal establishment) is not in continuous service within the meaning of clause (i) for any period of one year or six months, he shall be deemed to be in continuous service under the employer-
(a) for the said period of one year, if the employer during the period of twelve calendar months preceding the date with reference to which calcula¬tion is to be made, has actually worked under the employer for not less than-
(i) one hundred and ninety days, in the case of an employee employed below the ground in a mine or an establishment which works for less than six days in a week; and
(ii) two hundred and forty days, in any other case.
(b) for the said period of six months, if the employee during the period of six calendar months preceding the date with reference to which the calculation is to be made, has actually worked under the employer for not less than -
(i) ninety five days, in the case of an employee employed below the ground in a mine or in an establishment which works for less than six days in a week; and
(ii) one hundred and twenty days, in any other case.
Explanation: For the purpose of clause (2) the number of days on which an employee has actually worked under an employer shall include the days on which-
(i) He has been laid off under an agreement or as permitted by standing orders made under the Industrial Employment (Standing Orders) Act, 1946 (20 of 1946), or under the Industrial Disputes Act, 1947 (14 ofl947) or under any other law applic¬able to the establishment;
(ii) He has been on leave with full wages, earned in the previous year.
(iii) He has been absent due to temporary disablement caused by accident arising out of and in the course of his employment; and
(iv) In the case of a female, she has been on maternity leave; so, however, that the total period of such maternity leave does not exceed twelve weeks).
Where an employee employed in a seasonal establishment is not in continuous service within the meaning of clause (1) for any period of one year or six months, he shall be deemed to be in continuous service under the employer for such period if he has actually worked for not less than seventy five per cent of the number of days on which the establishment was in operation during such period.
COMPUTATION OF 5 YEARS FOR GRATUITY
How ‘Five year service' is to be computed under the Payment of Gratuity Act? Whether the period prior to the enforcement of the Act will be taken into consideration for computing Five years of service ?
The Payment of Gratuity Act applies to all those employees who are in service as on 16th September, 1972, or subse¬quent thereto. The computation of five years' service from 16th September, 1972, cannot be spelt out from any provision and the Act applies on and from 16th September, 1972 to the employees who have the credit of five years' service. The position is made amply clear by the definition of 'continuous service' contained in section 2(c) of the Act. (Cases of Bombay HC in Grindweli Norton Ltd., 1980 (40) FLR 53 and of Andhra Pradesh HC in Central Bank of India vs. T.K Ramamoorthy 1978 (52) FJR 490 were relied upon.).
Reference :
Duncans Agro Industries Ltd. vs. B. Subbanna and others, 1981 (64) FJR 134 decided by A.P. (HC); 1985 Lab. IC (NOG) 94.
The gratuity is considered an income and the employee who receives it is liable to pay taxes on it. However, gratuity up to Rs 3.5 lakh is exempted from Income Tax.
I hope i have cleared all your doubts
Regards
Ankita
Executive HR
“A candle loses nothing by lighting another candle.” In other words, be willing to help others and
share your knowledge and insights with others who may benefit.
From India, Patna
I Am glad to meet you,Here i am trying to clear your all doubt with references and suitable examples........
How to compute gratuity
:
For employees who have completed a total service of five years and above, gratuity will be calculated on [B]last basic salary drawn [/B]divided by 26 multiplied by 15 and the whole amount to be multiplied by number of years service. (For this purpose 6 months and above can be rounded up to a full years service and less than 6 months need not be.)
For employees who have not completed a total five years of service, will be calculated on last basic salary drawn divided by 26 multiplied by 15 and the whole amount to be multiplied by number of year’s service. More than fifteen days working in a month will be considered for full month and less than fifteen days will not be considered for calculation.
CASE-1: You are covered Under the Payment of Gratuity Act, 1971:
Gratuity shall be calculated as per the below formula:
Gratuity = Last drawn salary x 15/26 x No. of years of service
Your last drawn salary will comprise your basic + DA.
For computation of gratuity, your service period will be rounded off to the nearest full year.
CASE-2: You are not covered Under Payment of Gratuity Act, 1971 Gratuity shall be calculated as per the below formula:
Gratuity = Last drawn salary x ½ x No. of years of service
Your last drawn salary will comprise your basic + DA+ commission on sales on turnover basis.
AITACHMENT OF GRATUITY Can gratuity of an employee be attached?
No. It cannot be attached. Even if where the gratuity is payable under a scheme, it squarely comes within the purview of the Payment of Gratuity Act, 1972, and, therefore, the immunity of section 13 of the Act will be available.1 Section 60(1) (g) of the Civil Procedure Code also provides that gratuity payable to an employee cannot be attached and the Civil Court cannot grant injunction restraining the employer from payment of gratuity to an employee.
References :
Calcutta Dock Labour Board and another vs. Smt. Sandhya Mitra and others, 1.985 Lab. IC 714; AIR 1985 SC 996; 1985-1 UN 767; 1985(50) FLR332.
Chrisostom vs. Federal Bank Ltd. 1993-1 LLJ 422 (Kerala High Court).
Plz.... note that normally all kind of terminal benefits of employees are protected from attatchment like this. Example
The Employees Provident Fund and Miscellaneous Provisions Act 1952 - Sec: 10 Protection against attatchment:
(1) The amount standing to the credit of any member in the Fund (or of any exempted employee in a provident fund) shall not in any way be capable of being assigned or charged and shall not be liable to attachment under any decree or order of any Court in respect of any debt or liability incurred by the member....
(2) Any amount standing to the credit of a member in the fund or of an exempted employee in a provident fund at the time of his death and payable to his nominee under the Scheme or the rules of the provident fund shall, subject to any deduction authorised by the said Scheme or rules, vest in the nominee and shall be free from any debt or other liability incurred by the deceased or the nominee before the death of the member or of exempted employee and shall also not be liable to attachment under any decree or oder of any court.
The Pension Act 1871 - Sec 11. Exemption of Pension from Attachment: No pension granted or continued by Government on political consideration or on account of past services or present infirmities or as a compassionate allowance, and no money due or to become due on account of any such pension or allowance, shall be liable to seizure, attachment or sequestration by process of any Court at the instance of a creditor, for any demand against the pensioner or in satisfaction of a decree or order of any such court.
GRATUITY AND BREAK IN SERVICE
When does Break in service constitute under the Payment of Gratuity Act?
Section 2 (c) of the Payment of Gratuity Act as amended in 1984 defines the expression 'continuous service' as defined in section 2-A of the Act. Under that section, an employee is said to be in 'continuous service' for a period if he has, for that period, been _ in uninterrupted service including service which may be interrupted on account of absence from duty without leave (not being absence in respect of which an order treating the absence as break in service has been passed in accordance with the standing orders, rules or regulations governing the employees of the establishment, lay-offs, strike or lock-out or cessation of work not due to any fault of the employee, whether such uninterrupted or interrupted service was rendered before or after the commencement of the Payment of Gratuity Act.
MEANING OF CONTINUOUS SERVICE What is meant by 'continuous service' under the Act?
The term 'continuous service' has been controversial ever since the Payment of Gratuity Act came into force in 1972. In one case, the Supreme Court has also interpreted the term which has led to the amendment of the definition by the Amended Act 25 of 1984 whereby a separate section 2-A defining continuous service was added. Again by an Amending Act 22 of 1987, the amendment was made in the definition. In order to determine as to what continu¬ous service means it is imperative to reproduce section 2-A defining continuous service which reads:
(1) "An employee shall be said to be in continuous service for a period if he has, for that period, been in uninterrupted service, including service which may be interrupted on account of sickness, accident, leave, absence from duty without leave (not being absence in respect of which an order treating the absence as break in service has been passed in accordance with the standing orders, rules or regulations governing the employees of the establishment), layoff, strike or a lock-out or cessation of work not due to any fault of the employee, whether such uninterrupted or interrupted service was rendered before or after the commencement of the Act;
(2) Where an employee (not being an employee employed in a seasonal establishment) is not in continuous service within the meaning of clause (i) for any period of one year or six months, he shall be deemed to be in continuous service under the employer-
(a) for the said period of one year, if the employer during the period of twelve calendar months preceding the date with reference to which calcula¬tion is to be made, has actually worked under the employer for not less than-
(i) one hundred and ninety days, in the case of an employee employed below the ground in a mine or an establishment which works for less than six days in a week; and
(ii) two hundred and forty days, in any other case.
(b) for the said period of six months, if the employee during the period of six calendar months preceding the date with reference to which the calculation is to be made, has actually worked under the employer for not less than -
(i) ninety five days, in the case of an employee employed below the ground in a mine or in an establishment which works for less than six days in a week; and
(ii) one hundred and twenty days, in any other case.
Explanation: For the purpose of clause (2) the number of days on which an employee has actually worked under an employer shall include the days on which-
(i) He has been laid off under an agreement or as permitted by standing orders made under the Industrial Employment (Standing Orders) Act, 1946 (20 of 1946), or under the Industrial Disputes Act, 1947 (14 ofl947) or under any other law applic¬able to the establishment;
(ii) He has been on leave with full wages, earned in the previous year.
(iii) He has been absent due to temporary disablement caused by accident arising out of and in the course of his employment; and
(iv) In the case of a female, she has been on maternity leave; so, however, that the total period of such maternity leave does not exceed twelve weeks).
Where an employee employed in a seasonal establishment is not in continuous service within the meaning of clause (1) for any period of one year or six months, he shall be deemed to be in continuous service under the employer for such period if he has actually worked for not less than seventy five per cent of the number of days on which the establishment was in operation during such period.
COMPUTATION OF 5 YEARS FOR GRATUITY
How ‘Five year service' is to be computed under the Payment of Gratuity Act? Whether the period prior to the enforcement of the Act will be taken into consideration for computing Five years of service ?
The Payment of Gratuity Act applies to all those employees who are in service as on 16th September, 1972, or subse¬quent thereto. The computation of five years' service from 16th September, 1972, cannot be spelt out from any provision and the Act applies on and from 16th September, 1972 to the employees who have the credit of five years' service. The position is made amply clear by the definition of 'continuous service' contained in section 2(c) of the Act. (Cases of Bombay HC in Grindweli Norton Ltd., 1980 (40) FLR 53 and of Andhra Pradesh HC in Central Bank of India vs. T.K Ramamoorthy 1978 (52) FJR 490 were relied upon.).
Reference :
Duncans Agro Industries Ltd. vs. B. Subbanna and others, 1981 (64) FJR 134 decided by A.P. (HC); 1985 Lab. IC (NOG) 94.
The gratuity is considered an income and the employee who receives it is liable to pay taxes on it. However, gratuity up to Rs 3.5 lakh is exempted from Income Tax.
I hope i have cleared all your doubts
Regards
Ankita
Executive HR
“A candle loses nothing by lighting another candle.” In other words, be willing to help others and
share your knowledge and insights with others who may benefit.
From India, Patna
Thanks for the efforts much appreciated.
However, I'm still not clear on:
Ceiling amount of 10 lacs on gratuity = if my gratuity amount > 10 lac, yet I get max of 10 lac
and wat is the tax liability and calc of gratuity
From India, Mumbai
However, I'm still not clear on:
Ceiling amount of 10 lacs on gratuity = if my gratuity amount > 10 lac, yet I get max of 10 lac
and wat is the tax liability and calc of gratuity
From India, Mumbai
Hi Ankita,
"Sorry to be replying so late"
Gratuity paid upto an amount of Rs 10 lakhs is tax free
Regards
Ankita
Executive HR
“A candle loses nothing by lighting another candle.” In other words, be willing to help others and
share your knowledge and insights with others who may benefit.
From India, Patna
"Sorry to be replying so late"
Gratuity paid upto an amount of Rs 10 lakhs is tax free
Regards
Ankita
Executive HR
“A candle loses nothing by lighting another candle.” In other words, be willing to help others and
share your knowledge and insights with others who may benefit.
From India, Patna
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Gratuity Amendment-Press Information Bureau.docx
Payment of Gratuity Amendment Bill 2010.pdf