Sr. Hr Executive
Labour Laws & Ir
I Am Working In M J & Sons Distillery
Area Sales Manager
Object: It is an Act to provide for a scheme for the payment of gratuity to employees engaged in factories, mines, oilfields, plantations, ports, railway companies, and shops or other establishments.
Applicability: Any Employer of the above noted establishments where 10 or more persons are employed or were employed on any day of the preceding 12 months is liable to pay gratuity to its employees. Once the Act becomes applicable, it continues even if the number of employees falls below ten.
Entitlement: Gratuity is payable to an employee (nominee - in case of death of employee) who has rendered continuous service of five years or more on his termination of employment, superannuation, retirement or resignation. Completion of continuous service of five years is not necessary where the termination of employment is due to death of disablement.
Calculation: W x Y x 15/26 where W = Last Wage drawn i.e., basic + DA
Y = number of completed years of continuous service (six months or less to be ignored and more than six months to be counted as full year.
15 = 15 days salary
26 = No. of working days in a month.
Maximum Limit: Rs.3.5 lacs. (w.e.f 24-09-1997)
Time Limit for application to employer: Employee has to make an application in Form-I to his employer within 30 days from the date of gratuity becomes payable.
To calculate the gratuity: it has the formula
Ex. Number of yrs of service x Last salary drawn (Basic+D.A) X 15
This is the formula to calculate the gratuity.
28th December 2008 From India, Mumbai
He never made an application in form-I as mentioned in the post above.
Can we now ask him to make an application and close the issue?
6th January 2010 From India, Pune
I had worked in the co for 4yrs now including (1yr of Trainee & 1yr probation) I would like to know am i eligible for availing the Gratuity and whats the procedure for the same. Please Guide me about it. I dont think so my Co is giving me the gratuity when I'm leaving the company. So, I need to know how to avail it as its been deducted every month from my pay for last 4yrs during my training also . Am I eligible for the Grautity or do i need to complete 5yrs..to avail the gratuity. Im confused as they deduct the amount pay from the beginning but when it comes to return need minimum of 5yrs.
I would be awaiting for your reply at the earliest
6th September 2010 From India, Bangalore
Then approach your area labour office for proper enforcement of this law pertaining to payment of gratuity. It might be possible that none of the employees have become eligible to have gratuity from the employer under this Act.
23rd September 2010 From India, Delhi
“GRATUITY IS A VOLUNTARY PAYMENT MADE BY AN EMPLOYER IN APPRECIATION OF SERVICES RENDERED BY EMPLOYEE”.
Who is eligible for Gratuity?
As per Payment of Gratuity Act 1972, any employee who has been in continuous service for 5 years is eligible for gratuity.
During the above mentioned 5 years, employee is eligible for casual leave and sick leave without affecting his eligibility.
In case of death of an employee, the above condition 5 Years of continuous service is not applicable i.e. even if an employee dies
After 2 years of service, he/she is still eligible for gratuity.
The eligibility of an employee is predefined in HAPA (Human resources And People Appreciation). Gratuity in HAPA is auto calculated for the employees. A task is auto generated for the HR to process the same.
How is gratuity calculated?
a) Gratuity calculation formula for employees receiving monthly salary
When calculating completed years of service, if an employee worked for more than 6 months, it will be considered as full year.
Example: Employee worked for 14 years and 7 month, then completed years of service = 15 years
Example: Employee worked for 14 years and 5 months, then completed years of service = 14 years
Example: Employee worked for 14 years and 6 months, then completed years of service = 14 years
Last salary drawn = basic salary + dearness allowance
In HAPA, the HR need not to calculate the gratuity manually for the employees. It gets auto calculated for all the eligible employees and also a task is thrown to the HR to process the same.
b) Gratuity calculation formula for piece rated employees
(Workers receiving payment on the basis of the number of pieces produced)
Gratuity shall be calculated as follows:
Last drawn wages *15/26 *completed years of service
Completed years of service are calculated in the same way as for employees receiving monthly salary.
Last drawn wages are computed by taking average of the total wages received by him for a period of three months immediately preceding the termination of his employment. While computing daily wages, the total wages of last three months is to be divided by number of days the employee actually worked, and not by the number of days or the number of working days in the said period of three months.
Example: A piece rated employee received Rs.30,000 during the last three months before his retirement. The factory had 60 working days in the last three months but the employee came to work for only 30 days.
Last salary drawn will be calculated as rupees 30,000÷30= Rs.1000
In HAPA (Human resource And People Appreciation), whichis a complete HRMS application used by small and medium scale companies across the globe, gratuity is automatically calculated. HAPA automatically generates a task for the HR to remind/process gratuity of an employee on the completion of 5 years in the organization. At the same time, an email is sentautomatically by HAPA, to congratulate the employee for the completion of 5 years. This also maintains a “personal touch” at the workplace and delights the employees. The “personal touch” in a business is very important and essential for employee satisfaction & retention.
For more details about HAPA click the link below:
Welcome to G7CR Technologies India Private Limited | G7CR Technologies India Private Limited <link updated to site home> ( Search On Cite | Search On Google ) <link updated to site home> G7 CR Technologies
Maximum Amount of Gratuity
The amount of gratuity cannot exceed Rs 10, 00,000 (10 lacs). Even if it exceeds, maximum amount payable by employer shall be Rs 10, 00,000.
When is Gratuity Payable?
Gratuity is Payable on employee’s Superannuation, Retirement or death (whichever is earlier).
In case of death of an employee, gratuity is paid to their legal heirs (nominees)
Every employee who has completed one year of service is required to make a nomination. This nomination should be made within 30 days of completion of first year of service.
This nomination should be made in the favor of a family member. A nomination made in the name of any other person is void. However,“if the employer does not have any family that is when he can make a nomination in favor of any person”. But the employee will be required to make a fresh nomination within 90 days of acquiring a family.
Payment of Gratuity
After Gratuity becomes Payable , employer is required to pay it within 30 days as per the provisions of Payment of Gratuity Act 1972 .If the employer fails to pay gratuity within 30 days then, he shall be liable to pay simple interest at the rate notified by central government.
With HAPA (Human resources And People Appreciation), the HR does not have to do any manual calculations as mentioned above already. The payroll management feature of HAPA, which calculates the salaries of employees (including PF, TDS, ESI, Mediclaim etc.) also calculates Gratuity. HAPA ensures a timely and error free calculation without an HR keeping an eye on the calendar for reminders. HAPA does it all for you. Click the link for more: Welcome to G7CR Technologies India Private Limited | G7CR Technologies India Private Limited <link updated to site home> ( Search On Cite | Search On Google ) <link updated to site home> ]G7 CR Technologies[/url]
27th November 2013 From India, Bangalore
I am consfused regarding, this:
In case an Employee has served in an organisation for 5 years and 8 months. So, his period of service is considered to be 6 years.
So, while calculating the gratuity, in the formula, ( no.of years served) we need to take 6 years or only one year (because after completion of 5 yrs, one year he has completed...
kindly help me.....
9th December 2013 From India, Mumbai
= (Salary / 26) x 15 x Number of years in service
Salary is â€śLast drawn basic pay + DAâ€ť
26 is the average working days in a month (As per Gratuity rules â€“ 26 days not 30 days calculated)
15 is the actual days considered for gratuity in a year
2nd June 2015 From India, Bangalore
7th July 2015 From India, Khambhat
Thanks for the lovely info.
I am into my present organization,where fortunately or unfortunately i am leaving my present post exactly after 4.7 years.... (Including my last working day)
Kindly lf any body can tel me wud i be able to apply for my gratuty ??
15th July 2015 From India, Hyderabad
I have joined in GTL limited India on 1st June 2008. 16th June 08. GTL sent me Tanzania. Salary paid from there & stopped Indian salary although they sent me in deputation. July'10 I came back india. July'10 & August'10 They paid me 70% as salary advance. The salary paid it was decided at joing time. Again they sent me in Nepal Sep'10. I have been paid by Nepal GTL only. I worked there till 15th July'12. 16th July'12 they sent me to Myanmar. I continue work till june'15. HR request me to resign in GTL India. I send resign letter in India GTL on 23rd June 2015.
My question are: 1- Am I eligible for Gratuty?
2- Which salary will considered as last drawn salary.
Please reply me, thanks Soumen Das
17th September 2015 From Myanmar [Burma], undefined
You can below given link for calculation of gratuity :
Gratuity Calculator: Online Gratuity Calculator to find the Gratuity
29th May 2017
We offer end to end online/offline paid support services for the formation of gratuity trust. Our Services includes:-
1. Specialized Support Services for preparation of Inputs for Actuarial Certificate for Value of Obligation under the Gratuity Plan to be taken from an Actuary. This Certificate forms the basis for Initial contribution to be made by the organization into the Gratuity Fund.
2. Support Services in preparation of a board resolution to be passed by the Management of the company for formation of Gratuity Trust.
3. Analytic Support for Management of the Company to take the decision about Investment of the Self Managed Gratuity Trust Investment to be Self Managed by the Trustees or It will be any Investment Service Provider.
4. Advisory Services for Investment of Gratuity Fund into Group Gratuity Schemes.
5. Legal Support Services for Drafting Trust Deed and Trust Rules as per Income Tax Rules 1962.
6. Support Services for filing an application in IT Department for Approval for the purpose of tax exemptions upon the funding as well as the interest portion.
For more detail contact us at 9211637063 or send your queries/ requirement at my email ID -
7th June 2019 From India, Delhi
How Gratuity is Calculated
The gratuity amount depends upon the tenure of service and last drawn salary. It is calculated according to this formula: Last drawn salary (basic salary plus dearness allowance) X number of completed years of service X 15/26.
According to this formula, the time period of over six months or more is considered as one year.
This means if you have completed five years and seven months of service, the number of years would be considered as six years for calculation of gratuity benefit.
On the other hand, if the service period is five years and five months, for gratuity calculation it will be considered five years.
An employer can however give higher gratuity than the amount under the prescribed formula.
For government employees, Rs. 20 lakh is the maximum amount that can be paid as gratuity. The Seventh Pay Commission had recommended increase in the gratuity ceiling to Rs. 20 lakh from the earlier level of Rs. 10 lakh.
Income Tax Treatment of Gratuity
For government employees, entire amount of gratuity received on retirement or death is currently exempted from income tax.
In case of non-government employees, income tax rules on gratuity are applicable depending 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 any gratuity received is least of the following:
• Maximum amount specified by the government which is currently Rs. 10 lakh
• Last drawn salary X 15/26 X years of service
• Actual gratuity received
For example, the last drawn salary (basic plus DA) of Mr Ashish, for example, is Rs. 60,000 (per month) and he has worked for 25 years. The gratuity according to the formula is Rs. 8.65 lakh but suppose he has actually received gratuity of Rs. 12 lakh.
So for income tax calculation, Rs. 8.65 lakh will be considered for exemption. So Mr Ashish will pay tax on Rs. 3.35 lakh (Rs. 12 lakh - 8.65 lakh).
For non-government employees not covered under the Payment of Gratuity Act, the income tax exemption on any gratuity received is least of the following:
• Half month's average salary for each completed year of service
• Maximum amount specified by the government which is currently Rs. 10 lakh
• Actual gratuity received
(Average monthly salary is to be computed on the basis of average of salary for 10 months immediately preceding the month (not the day) of retirement)
For example, the last drawn salary (basic plus DA) of Mr Bhupesh, for example, is Rs. 70,000 and he has worked for 35 years. The gratuity according to the formula is Rs. 12.25 lakh and he has received this amount as gratuity. For tax purposes, Rs. 10 lakh would be considered as exemption limit as it is the lowest of the three factors. So Mr Bhupesh will have to pay tax on Rs. 2.25 lakh (Rs. 12.25 lakh - Rs. 10 lakh).
12th July 2019 From India