Hi ,
gratuity
Guidelines
1 Introduction
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
2 Applicability
Applicable to those organizations where employee strength is more than 10
3 Family
Himself/ Herself
Spouse
Children (married or unmarried)
Dependent parents
Dependent in laws
Widow & children of predeceased son
Adopted children
4 Definitions
Superannuation
Attainment of age for vacating employment
Retirement
Termination of employment other than superannuation
Wages
Earned while on duty or on leave.
Includes DA
Does not include bonus, HRA, overtime, commission etc.
5 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
If a person has completed 240 days in a year on his/ her fifth year of service,
he/ she is eligible for gratuity
6 Calculation
The formula for calculating gratuity is as follows –
[(Salary*15)/26]*service period
Where,
Salary = Basic + DA
PRESENT BASIC X No. OF COMPLETED YEAR X 15
Gratuity= ------------------------------------------------
26
7 Calculation of gratuity in CTC
5% of basic salary
In some cases it is actually 4.81% which is rounded up to the nearest integer
8 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.
9 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