For calculation of Gratuity not only the basic salary but the dearness allowance and such other allowances which are payable to an employee as per contract of employment should also be taken into account.The salary for the purpose of gratuity is the amount of salary which the employee gets while on work or on leave.
Suppose your salary is Rs 60000 per month. When you take say five days' leave with pay, you will get the same Rs 60000.Suppose you take 5 days' leave without pay,your pay will be reduced by Rs 10000,ie, 60000 divided by 30 multiplied by 5. That means 60000 is your monthly pay and it is for the convenience of the employer that they have made it as basic pay, HRA, washing allowance etc and for an employee whatever is payable is the gross salary. If that stand is taken your gratuity will be Rs 830769. That is 60000 divided by 26 (for gratuity calculation monthly salary is to be divided by 26 and not by 30) multiplied by 15 (to get 15 days salary)and then multiplied by 24 (your service)
However,most of the companies follow the first method and for them basic salary is the foundation and is always a weak foundation! I am sure having said what is basic salary under Provident Fund by the Supreme Court, the next battle is to define basic salary under Payment of Gratuity Act.It is to be noted that there is no much difference in the definition of wages under both these Acts.
13th June 2019 From India, Kannur