Gratuity More Than 3.5 Lakhs

Dear Sir/ Madam,
There is no limit of the amount of Gratuity payable to employees.
Regards
Subhabrata Dasgupta

Hi,

The law say it clearly " Gratutity is paid to all such employees after their resignation or retirement.In case of resignation gratuity is paid to such employees who have completed 5 yrs of service".

The amount of gratuity may differ from management to management.( There is no celing on max amount to be given)

Calculation of Gratuitypayment as per IT Act.

Half the month Basic + DA(ie. consider last month salary)*no of years of service.

In order to make you understand better. Let me explain it with an illustration

Example: Mr A an employee completed 30 yrs and 10 months of service.And at the time of retirement he received rs.3,60,000 as gratuity and his Last month basic + DA was Rs 18,000

18000/2 = 9000
For 31 years, it is 9000*31
= 2,79,000

But management paid 3,60,000 to this employee .

Exemption of Gratuity as per IT Act:

Amt of Gratuity as per Calculation or 3,50,000,which ever is less.

In this case.

Amount of Gratuity received 3,60,000
(-) Gratuity Exempted 2,79,000

Taxable Gratuity is 81,000

This amt of taxable gratuity rs 81,000 will be added to his total salary in form 16.

Guess this would give you better understanding of Gratuity.

Thanks & Regards

Jai

HR Manager
9963692016

Thanks for the input.
For employees who have less than 5 yrs of service in the organisation, gratuity amount is given to them as cash in hand in form of special amount.
Please correct me if I am wrong.

Hello to all,
There is another dimension in Gratuity that it is not mandatory for employer to pay gratuity to the person who is terminated because of misconduct or any misappropriation.
Regards,
Sandeep K.

Dear Maheswara Rao,
I beg to differ with you,what ever max limit you are talking its in IT context.There is no upper ceiling on payment of gratuity amount.
Please do correct me if i am wrong
Regards
Jai

Hi Friends
I would like to know that how do we add up Gratuity in CTC. Is there any percentage of basic amount which is to be added in CTC. Can anybody clarify me on this.
Thanks
Tushar

Hi,

Please be informed that there is no upper limit for gratuity as is discussed in this forum.

There is just a non taxable limit of 3.5 lakhs, anything above 3.5 will be taxed by the IT department but the government of India or none of the acts governing industries or commecial establishments has put a limit to the amount of gratuity provided to the employee.

Also be informed that any part mentioned as CTC is due by the company to the employee and hence when an employee leaves the job before 5 years and he contests for the gratuity amount the company will have to pay him the same. The gratuity amount is included in the CTC for two reasons one its a tax saving instrument for the companies and secondly the CTC amount is better than it was to the candidate. It just looks better. Though there is no liability of the company to pay the gratuity amount on a monthly basis.

The gratuity calculation is as follows:

Amount of Gratuity is paid at the rate of 15 days for every complete year of service and is computed as follows.

(RATE OF BASIC + DA) X 15 X NO. OF YEARS OF SERVICE / 26

Hence find out the monthly component and add that to the CTC.

Regards,

AJ

Hi Tushar,
Please be informed that there is no percentage since the amount of gratuity wont be a lot if included in the monthly payment.
Regards,
AJ

Hi,
Bhusan is very right if employers will pay to the employee Rs. 3.5 L to more then do it, but after Rs. 3.5 laks all amount should taxable.
Thanks
Manoj