Is Completing 5 Years Necessary for Gratuity if It's Included in Our Salary Package?

Dear All,

If Gratuity is covered in our CTC which is shown in our salary package at that time is it compulsory to complete the 5 years???????:?:

Please Advise…….

With Regards,

Sudam Vanarse

I was told by my HR that if I did not continue for 5 years, the gratuity, which is part of my CTC, will be deposited to the government. I can't withdraw if the period of service is less than 5 years.

Dear employer,

Just to clarify, the statement provided by HR regarding your CTC is not accurate. If you do not continue for 5 years, the gratuity, which is a part of your CTC, will not be deposited to the government. You should be able to withdraw it even if your period of service is less than 5 years.

Regards,
J. S. Malik

To become eligible to receive gratuity, one has to complete 5 years of continuous service. If the employer includes this benefit in the CTC, they may be making a provision for the same. However, if the employee discontinues service before completing 5 years, the employer may not be liable to pay gratuity or deposit the provided amount anywhere.

Regards,
Madhav

Hi,

As far as I know, if Gratuity is a part of your CTC and the company is deducting the same from your salary, then the company has to pay back the total amount deducted if the employee leaves before 5 years of service with the organization.

Malik Sir, please let me know if I'm wrong.

Regards,
Suparna

Dear Friends,

The person should have completed 5 years of service in PF to be eligible for GRATUITY.

Dear Friends,
It has been already discussed in our HR cite.Mr.Malik had given a clear statement about the gratuity which has been included by employer in the CTC.The gratuity is applicable when the employee completes his 5 years of continuous service in the organization.

Some Hint points about Payment of Gratuity:

Gratuity paid for faithful continuous service in the organization
Payable on completing 5 years of continuous service with the organization
Includes probation period
The above rule is waived of in the eventuality of
Death
Permanent disablement

Payment of Gratuity:

Gratuity can be paid to an employee when
He is superannuated
Resigned/ retired after 5 years of continuous service
Permanent disablement
Death

Calculation for Gratuity:

The formula for calculating gratuity is as follows –
[(Salary*15)/26]*service period
Where,
Salary = Basic + DA

Taxability:
Not taxable up to the ceiling of 3.5 lakhs.
Any amount above the same will be taxable.
The ceiling is applicable only once during the entire service period
e.g.: If the person changes his job more than once, then he will avail the benefit of tax savings upto 3.5 lakh only once.

Withdrawal of gratuity:

Non-transferable
The LIC draws a cheque in the favor of the organization/ Gratuity Trust
In turn draws cheque in favor of the employee

Warmest Regards,
Mohan.M.S

Mr. Mohan,

Thanks for the clarity. My question is regarding gratuity, which is shown as part of CTC and clearly stated in the appointment letter. The issue at hand is where the fund will be deposited if an employee leaves an organization before completing the mandatory 5 years. From the employer's perspective, they have already factored in the cost provision.

In the scenario where an employee does not meet the eligibility criteria to receive the gratuity amount, who becomes the beneficiary – the employer or the government? The employer cannot withhold the gratuity owed to the employee, as it was already outlined in the appointment letter.

Can we take any legal action against an employer if he is not ready to pay the deducted amount?

Regards,
Shishir

Mr. Pon,

Can you send the scanned copy of your appointment letter so that I can have a clear idea? The Gratuity Act is applicable only when the employee completes continuous service of 5 years, so you cannot take any action against the employer.

Warmest Regards,

Mohan M. S