Labour Law & Hr Consultant
Korgaonkar K A
Raj Kumar Hansdah
Shrm, Od, Hrd, Pms
Human Resources
+2 Others

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HI, I need information about Gratuity payment: 1. As per the act gratuity selling is 10lac ,if any employee gratuity amount is above 10lac then what would be done in this case? Regards, Umesh
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You can pay the actual amount or limit it to Rs 10lacs.It is your discretion. Varghese Mathew 9961266966
Dear Umesh ji,
I agree with Varghese ji. You can pay more than the limit prescribed under the Law. It is up to you. No one will ask you why you paid more than Law. If you pay less than Law, certainly you will be asked.
This is applicable not only to payment of gratuity but to every payment. Only thing, you need to see the implication of Income Tax.
Whenever/Whatever we paying wages/bonus/gratuity/ or any other statutory we shall obey government orders/Acts/rules. other wise we have liable to pay the government fixed the amount as held by justice. so as fixed by government regarding wages or any thing under law we liable to pay said that amount.
I endorse the opinion of Mr. Verghese Mathew and Mr. Koragaonkar.
Law does not prohibit or debar better terms and payment to employees.
This is amply illustrated in Payment of Gratuity Act 1972, Section 4. (5) - Nothing in this section shall affect the right of an employee to receive better terms of gratuity under any award or agreement or contract with the employer.
However, as already mentioned earlier; the gratuity amount above Rs. 10 lakhs shall be taxed.
Warm regards.
Dear Umesh Ji,
Usually, if the computed amount of gratuity exceeds the ceiling of Rs.10 lakh, the actual payment is restricted to the amount of ceiling. However, the law does not prohibit the employer from making payment of gratuity in excess of the ceiling. In such a case, the amount in excess of the ceiling becomes taxable income. Gratuity up to ceiling limit is not taxable. When it is paid in excess of the ceiling, income tax is to be deducted on amount exceeding the ceiling. Regards, Shyam Agrawal
Dear friends,
I agree with the views expressed by all the members. The norms set by any welfare law relating to payment of any monetary compensation or terminal benefit are only the minimum taking into consideration of the over-all financial capacity of vast majority of employers as a whole and that's the reason for notional ceiling of salary for calculating the benefit or putting a limit on the quantum of the consequential benefit or sometimes both. However, paying beyond the ceiling is not prohibited and in fact it is encouraged by incorporating rider provisions in the statute as rightly pointed out by Rajkumar. But, the amount of benefit exceeding the quantum of the ceiling prescribed becomes taxable as suggested by the members.
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