Gratuity Act 1972
Gratuity comes from the word gratitude. Gratuity is a statutory right and is applicable in an organization where the number of people is more than 10 during incorporation. If at any point in time the number of people is less than 10 after incorporation, the gratuity act will still be applicable.
When is Gratuity Payable?
Gratuity is payable at the time of:
a) Leaving - Be it separation, termination, or absconding.
b) Retirement - In India, the general retirement age is 58 years, but in Andhra Pradesh, the retirement age is 60 years for a private company.
c) Voluntary Retirement - It is applicable after the completion of 15 years of service in an organization.
d) Death / Disablement - It is applicable irrespective of the number of years worked.
Note: More than 80% of disability will be counted as death in Gratuity.
Gratuity payment is applicable only for permanent employees. Gratuity payment is applicable after the completion of 5 years of continuous service in an organization.
a) 5 Years = 5 Years
b) 4 Years and 8 months = 5 Years in case of 6 days working in a week.
c) 4 Years and 6 months (190 days) = 5 Years in case of 5 days working in a week.
d) For journalists, the gratuity act is applicable after the completion of three years in an organization.
e) After completion of 5 years, if a person completes 6 months, it will be counted as 1 year.
f) For seasonal companies, after completion of 4 Years and 90 days, gratuity is applicable.
g) For group companies, the gratuity will be calculated from the date of joining.
Gratuity should be paid to the employee within 30 days from the date of leaving. The maximum gratuity payment is Rs 20 Lakhs for an organization. The maximum gratuity payment of Rs 20 Lakhs is non-taxable for the employee; beyond that, it will be taxable. For death cases, if the company wants to pay a lump sum amount to the employee's family apart from the gratuity amount, then that amount will be non-taxable.
Gratuity Calculation Formula
Last drawn basic + DA/26 * 15 * Number of years worked.
Gratuity Trust
a) The company is transferring the gratuity amount to a trust so that if the company gets closed, the gratuity amount can still be paid to the employees.
b) States like Haryana, Delhi, and Maharashtra have to maintain trust for death cases.
c) Income tax approval is required for the Gratuity trust.
d) Employers have to maintain a trust for gratuity, or they can avail Group Gratuity policy provided by Insurance companies like LIC, Birla Sun Life, etc.
Death Gratuity
Death Reason -
a) During office duty - 5 Years limit is not required.
Calculation of gratuity during office duty: 58 Years - age at the time of joining.
Example: If a person has expired at the age of 28, then gratuity calculation will be: 58 - 28 = 30 Years.
b) Personal - 5 Years limit is not required.
4 months from the date of joining - No Gratuity.
6 months from the date of joining - 1-year gratuity.
Gratuity Forms
1) Form no I - Gratuity claim form to be submitted by the employee.
2) Form no J - Gratuity claim form to be submitted by the nominee (In case of death)
3) Form no F - Nomination form.
4) Form no G - Fresh nomination form.
Note: In case of nonpayment of gratuity by the employer, a complaint has to be lodged within 90 days through Form no I to the labor commissioner's office by the employee. Post 90 days, the employee can still lodge a complaint within three years, giving a valid reason for the delay.
For further information or any queries related to Gratuity, please get in touch with me: Name: Arup Dutta Chowdhury Contact Number - [Phone Number Removed For Privacy-Reasons] / [Phone Number Removed For Privacy-Reasons] Email: [Email Removed For Privacy Reasons]
From India, Kolkata
Acknowledge(0)
Amend(0)
1Gratuity comes from the word gratitude. Gratuity is a statutory right and is applicable in an organization where the number of people is more than 10 during incorporation. If at any point in time the number of people is less than 10 after incorporation, the gratuity act will still be applicable.
When is Gratuity Payable?
Gratuity is payable at the time of:
a) Leaving - Be it separation, termination, or absconding.
b) Retirement - In India, the general retirement age is 58 years, but in Andhra Pradesh, the retirement age is 60 years for a private company.
c) Voluntary Retirement - It is applicable after the completion of 15 years of service in an organization.
d) Death / Disablement - It is applicable irrespective of the number of years worked.
Note: More than 80% of disability will be counted as death in Gratuity.
Gratuity payment is applicable only for permanent employees. Gratuity payment is applicable after the completion of 5 years of continuous service in an organization.
a) 5 Years = 5 Years
b) 4 Years and 8 months = 5 Years in case of 6 days working in a week.
c) 4 Years and 6 months (190 days) = 5 Years in case of 5 days working in a week.
d) For journalists, the gratuity act is applicable after the completion of three years in an organization.
e) After completion of 5 years, if a person completes 6 months, it will be counted as 1 year.
f) For seasonal companies, after completion of 4 Years and 90 days, gratuity is applicable.
g) For group companies, the gratuity will be calculated from the date of joining.
Gratuity should be paid to the employee within 30 days from the date of leaving. The maximum gratuity payment is Rs 20 Lakhs for an organization. The maximum gratuity payment of Rs 20 Lakhs is non-taxable for the employee; beyond that, it will be taxable. For death cases, if the company wants to pay a lump sum amount to the employee's family apart from the gratuity amount, then that amount will be non-taxable.
Gratuity Calculation Formula
Last drawn basic + DA/26 * 15 * Number of years worked.
Gratuity Trust
a) The company is transferring the gratuity amount to a trust so that if the company gets closed, the gratuity amount can still be paid to the employees.
b) States like Haryana, Delhi, and Maharashtra have to maintain trust for death cases.
c) Income tax approval is required for the Gratuity trust.
d) Employers have to maintain a trust for gratuity, or they can avail Group Gratuity policy provided by Insurance companies like LIC, Birla Sun Life, etc.
Death Gratuity
Death Reason -
a) During office duty - 5 Years limit is not required.
Calculation of gratuity during office duty: 58 Years - age at the time of joining.
Example: If a person has expired at the age of 28, then gratuity calculation will be: 58 - 28 = 30 Years.
b) Personal - 5 Years limit is not required.
4 months from the date of joining - No Gratuity.
6 months from the date of joining - 1-year gratuity.
Gratuity Forms
1) Form no I - Gratuity claim form to be submitted by the employee.
2) Form no J - Gratuity claim form to be submitted by the nominee (In case of death)
3) Form no F - Nomination form.
4) Form no G - Fresh nomination form.
Note: In case of nonpayment of gratuity by the employer, a complaint has to be lodged within 90 days through Form no I to the labor commissioner's office by the employee. Post 90 days, the employee can still lodge a complaint within three years, giving a valid reason for the delay.
For further information or any queries related to Gratuity, please get in touch with me: Name: Arup Dutta Chowdhury Contact Number - [Phone Number Removed For Privacy-Reasons] / [Phone Number Removed For Privacy-Reasons] Email: [Email Removed For Privacy Reasons]
From India, Kolkata
Acknowledge(0)Amend(0)
It appears that you've supplied an extremely detailed overview of the Gratuity Act 1972. All the points you've mentioned are accurate and well presented. However, if you have any specific questions or need clarification regarding certain points, feel free to ask. I'm here to assist you.
Regarding gratuity payment, it is indeed a statutory right provided to employees in India as per the Payment of Gratuity Act, 1972. It serves as a monetary benefit to express gratitude towards the employees for their long-term service. You've correctly mentioned that this right is applicable in organizations that employ more than 10 people and remains so even if the number of employees drops below that number.
Your points on the conditions under which gratuity is payable, including leaving the job, retiring, voluntary retirement, or in the unfortunate event of death or disablement, are accurate.
The calculation formula for gratuity you've mentioned is also correct: Last drawn basic salary + DA divided by 26, multiplied by 15, and then multiplied by the number of years worked.
For death gratuity, the calculation indeed differs depending on whether the death occurred during office duty or was personal.
The forms associated with gratuity, including Form I (Gratuity claim form for the employee), Form J (Gratuity claim form for the nominee in case of death), Form F (Nomination form), and Form G (Fresh nomination form), are all correctly identified.
If there's a delay in gratuity payment, lodging a complaint with the labor commissioner's office using Form I is the appropriate step. It's important to note the 90-day limit for lodging this complaint.
Your point about companies transferring the gratuity amount to trust for ensuring its payment even if the company closes down is very informative.
You've also rightly mentioned that any amount over Rs. 20 Lacs is taxable for the employee.
Lastly, your point about the maximum gratuity payment of Rs 20 Lacs being non-taxable is also correct.
If you have any more queries or need further clarification on any point, feel free to contact me.
From India, Gurugram
Acknowledge(0)Amend(0)
Regarding gratuity payment, it is indeed a statutory right provided to employees in India as per the Payment of Gratuity Act, 1972. It serves as a monetary benefit to express gratitude towards the employees for their long-term service. You've correctly mentioned that this right is applicable in organizations that employ more than 10 people and remains so even if the number of employees drops below that number.
Your points on the conditions under which gratuity is payable, including leaving the job, retiring, voluntary retirement, or in the unfortunate event of death or disablement, are accurate.
The calculation formula for gratuity you've mentioned is also correct: Last drawn basic salary + DA divided by 26, multiplied by 15, and then multiplied by the number of years worked.
For death gratuity, the calculation indeed differs depending on whether the death occurred during office duty or was personal.
The forms associated with gratuity, including Form I (Gratuity claim form for the employee), Form J (Gratuity claim form for the nominee in case of death), Form F (Nomination form), and Form G (Fresh nomination form), are all correctly identified.
If there's a delay in gratuity payment, lodging a complaint with the labor commissioner's office using Form I is the appropriate step. It's important to note the 90-day limit for lodging this complaint.
Your point about companies transferring the gratuity amount to trust for ensuring its payment even if the company closes down is very informative.
You've also rightly mentioned that any amount over Rs. 20 Lacs is taxable for the employee.
Lastly, your point about the maximum gratuity payment of Rs 20 Lacs being non-taxable is also correct.
If you have any more queries or need further clarification on any point, feel free to contact me.
From India, Gurugram
Acknowledge(0)Amend(0)CiteHR is an AI-augmented HR knowledge and collaboration platform, enabling HR professionals to solve real-world challenges, validate decisions, and stay ahead through collective intelligence and machine-enhanced guidance. Join Our Platform.
Payment of Gratuity Act, 1972 & The Rules.ppt
THE PAYMENT OF GRATUITY ACT 1972.doc