1) Gratuity comes from the word gratitude.
2) 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 of time the number of people is less than 10 after the incorporation, still the gratuity act will be applicable.
3) Gratuity is payable at the time of :
a) Leaving - Be it separation, termination or absconding.
b) Retirement - In India 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 a death in Gratuity.
4) Gratuity payment is applicable only for permanent employees.
5) 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 6 days working in a week.
c) 4 Years and 6 months (190 days)= 5 Years in case 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 6 months is completed then 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.
6) Gratuity should be paid to the employee within 30 days from the date of leaving.
7) Maximum gratuity payment is Rs 20 Lacs for an organization.
8) Maximum gratuity payment of Rs 20 Lacs is nontaxable for the employee beyond that it will taxable.
9) 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 nontaxable.
Gratuity Calculation formula :
Last drawn basic+DA/26*15* No of years worked.
Gratuity Trust :
a) Company is transferring the gratuity amount to trust so that if the company gets closed still the gratuity amount can be paid to the employees.
b) State like Haryana, Delhi, and Maharashtra has to maintain trust for death cases.
c) Income tax approval is required for Gratuity trust.
d) Employer has 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 then a complaint has to be lodged within 90 days through Form no I to the labor commissioner office by the employee. Post 90 days employee still can 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 - 9038960962/9007588322
email id : From India, Kolkata
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