KK!HR
Management Consultancy
Suresh2511
Labour Consultant
Satishrw
Service
Shukla.chirag
Hr Executive
+2 Others

Kindly confirm on 5.7 years of continues services staff will eligible for 5 years gratuity or 6 years gratuity


The service of more than 5 years and six months would render you eligible for six years gratuity by a combined reading of Sections 4(2) & 2A. As per Section 4(2) gratuity is payable for every completed year of service and for every part in excess of six months. Section 2A defines continuous service of more than 120 days in a period of six months as six months service under the Act. So seven months continuous service will qualify for one additional year of service for calculation of gratuity and accordingly the calculation of gratuity has to be for six years.
From India, Mumbai
Gratuity
Gratuity is a defined benefit plan and an important form of social security employee benefits. It is one of the many retirement benefits offered by the employer to the employee upon leaving his job. Gratuity is a part of salary that is received by an employee from his/her employer in gratitude for the services offered by the employee in the company. An employee may leave his job for various reasons such as retirement, by way of voluntary retirement, resignation or for a better job elsewhere. Every factory or establishment would pay gratuity to its employees if employees are more than 10; according to Payment of Gratuity Act, 1972.
Gratuity is calculated on Basic+DA. It is TAXFREE upto 10 Lakhs.
Eligibility to receive gratuity
An employee will be eligible for receiving gratuity:
Only if he completes 4years 6months 1day when he/she resigns from the company for continuous service with a single employer
When he/she retires from the company
When he/she dies or suffers disability due to illness or accident
Note :
6 months+1 day of a year can be counted as one year.
Examples for consideration of years :
1) 7 years 6 months 1 day = 8 years (considered)
2) 7 years 6 months = 7 years (considered)
3) 7 years 4 months = 7 years (considered)
Calculation of gratuity :
Gratuity = (last payslip’s Basic+DA) * (15/26) * (number of years serviced)
Example :
Consider Basic+DA = 6500
Time period = 6 years 7 months
Calculation :
Gratuity = (Basic+DA) * (15/26) * no. of years serviced
=(6500) * (15/26) * 7
=26,250
Employee can give nomination by filling ”Form F” at the time of joining the company (during new joinee formalities). Employee can nominate one or more members of his/her family to receive the gratuity amount in the event of death of the employee.
To claim the amount of gratuity:
Form I
Application for gratuity.
To be submitted by the employee within 30 days of gratuity being payable.
Form J
Application of gratuity by nominee.
To be submitted by the nominee to the employer within 30 days of gratuity being payable.
Form K
Application of gratuity by legal heir.
To be submitted to the employer within a year of gratuity being payable.
Form L
Notice for payment of gratuity.
On verification of claims, the employer issues a notice to the employee/nominee/legal heir about the amount of gratuity payable within 15 days of the receipt of notice. The payment should be made within 30 days of the receipt of application.
Tax Exemption on Gratuity payment to an employee as per Income Tax Act
For government employees, entire amount of gratuity received on retirement or death is exempted from income tax.
In case of non-government employees, income tax rules on gratuity depend on whether employees are covered under the Payment of Gratuity Act, 1972 or not. For non-government employees covered under the Gratuity Act, the income tax exemption on gratuity received is least of the following:
15 days salary based on the salary last drawn for every completed year of service or part thereof in excess of 6 months. Therefore the amount that shall be exempt from total Gratuity paid is calculated as Last drawn salary(Basic+DA) * 15/26 * years of service.
Maximum amount specified by the government which is currently Rs. 10 lakhs.
Actual gratuity received.
For non-government employees not covered under the Payment of Gratuity Act, the income tax exemption on gratuity received is least of the following:
Half month’s average salary for each completed year of service. While calculating completed years, any fraction of a year shall be ignored.
Maximum amount specified by the government which is currently Rs. 10 lakhs.
Actual gratuity received.
From India, Hyderabad
If there is a clause of 120 days consideration for fraction year than even 5.4 years will also eligible for 6 years gratuity not for 5 years and 4.4 years will eligible for 5 years. Plz clarify.

Please note that 4 yrs. 6 months 1 day doesn't make you qualify for gratuity. One has to put continuous service of minimum 4 yrs and >240 days to qualify for gratuity payment.
Suresh
From India, Thane
As regards eligibility of gratuity with 4.4 years or any thing upto 4years nd 6 months service is concerned, it is not fulfilling the eligibility of being 'in excess of six months' service.
From India, Mumbai
Dear Suresh,
There has not mentioned anywhere as 240 days completion for concern the Gratuity payment.
From India, Mumbai
Satish
In the fifth year of continuous service ,minimum 240 days should be completed where establishment works for 6 days a week.
From India, Pune
In CTC structure of employee if Gratuity amount is mentioned , and if he or she has completed less than 5 years of service in organization , then he or she is eligible to get gratuity amount in Full and final settlement?
From India, Pune
Just because Gratuity amount is mentioned in CTC does not mean you will get gratuity.
Minimum term of continuous service has tone rendered for eligibility to gratuity.
From India, Pune
Expert of the Act is as follows:-
4. Payment of Gratuity.- (1) Gratuity shall be payable to an employee on
the termination of his employment after he has rendered continuous service for
not less than five years,-
(a) on his superannuation, or
(b) on his retirement or resignation,
(c) on his death or disablement due to accident or disease:
Provided that the completion of continuous service of five years shall not be
necessary where the termination of the employment of any employee is due to
death or disablement:
1[Provided further that in case of death of the employee, gratuity payable to
him shall be paid to his nominee or, if no nomination has been made, to his
heirs, and where any such nominees or heirs is minor, the share of such minor,
shall be deposited with the Controlling Authority who shall invest the same for
the benefit of such minor in such bank or other financial institution, as may be
prescribed, until such minor attains majority].
Explanation.- For the purposes of this section, disablement means such
disablement as incapacitates an employee for the work which he was capable of
performing before the accident or disease resulting in such disablement.
(2) For every completed year of service or part thereof in excess of six
months, the employer shall pay gratuity to an employee at the rate of fifteen days'
wages based on the rate of wages last drawn by the employee concerned:
Provided that in the case of a piece-rated employee, daily wages shall be
computed on the average of the total wages received by him for a period of three
months immediately preceding the termination of his employment, and, for this
purpose, the wages paid for any overtime work shall not be taken into account:
Provided further that in the case of
2[an employee who is employed in a
seasonal establishment, and who is not so employed throughout the year], the
employer shall pay the gratuity at the rate of seven days' wages for each season.
3[Explanation.-In the case of a monthly rated employee, the fifteen days'
wages shall be calculated by dividing the monthly rate of wages last drawn by
him by twenty-six and multiplying the quotient by fifteen.]
(3) The amount of gratuity payable to an employee shall not exceed 4[ten
lakh rupees].
(4) For the purpose of computing the gratuity payable to an employee who is
employed, after his disablement, on reduced wages, his wages for the period
preceding his disablement shall be taken to be the wages received by him during
that period, and his wages for the period subsequent to his disablement shall be
taken to be the wages as so reduced.
(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.
From India, Madras
After completion of 5 years service additional more than 6 months counted for one year and less than 6 months ignore for calculating service period,we are bound to implement this formula as per gratuity Act.So the 5.7 years shall be counted for 6 years ,not five years.
From India, Jalandhar
After completion of 5 years service additional more than 6 months counted for one year and less than 6 months ignore for calculating service period,we are bound to implement this formula as per gratuity Act.So the 5.7 years shall be counted for 6 years ,not five years.
From India, Jalandhar
In gratuity act, for 6 months continuous service is defined by 120 days working including leave, weekly off, paid holiday, absent without leave. In such scenario even on 5.4 years, staff eligible for 6 years gratuity. Needs clarity on it.

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