Understanding Gratuity Limits for Deceased Employees: Is the Rs. 3,50,000 Cap Always Applicable?

Hi All:

I understand that the Gratuity for any death case would be calculated based on the below formula (as per Gratuity Act):

Gratuity amount = (No. of years of service in the company + No. of service years left till his age of 58) * (15/26 * Last drawn basic)

Points to note:

1. Gratuity amount can have a slab of Rs. 3,50,000/-, and this can be relaxed if the company is willing to give more compensation.
2. Gratuity amount is non-taxable.

The above-mentioned data are completely based on compliance set by our government.

My question here is, will the Gratuity slab of Rs. 3,50,000/- be applicable even in the case of death, or is there any clear instruction given somewhere (in Gratuity Act) about Gratuity payable with different conditions for the deceased employee regarding the slab amount? I would appreciate it if somebody could give me a clear indication.

Regards,
Arun Kumar Vijayamoorthy
Cognizant

Dear Mr. Arun,

Rs. 3,50,000.00 is the maximum gratuity payable. However, the gratuity amount will vary as per the following calculation:

Wages: Wages shall consist of basic plus DA, as per the last drawn salary. Allowances such as bonus, commission, HRA, overtime, etc., are not to be considered for calculations.

Formula:
(Basic + DA) / 26 X 15 X number of years of service

* If the employee has completed more than 6 months, it will be treated as a full year for the purpose of gratuity calculation.

There is no change for a deceased employee, but you have to calculate it according to the formula.

Regards,
Alphonse

- The formula for calculating the amount of gratuity remains the same.
- The maximum limit is Rs. 3.5 lakh.
- In the case of the death of an employee, only the condition of completing 5 years is not applicable.

Thanks,

Hi Nishi,

Is the formula not the number of years of service in the company plus the number of service years left until his age of 58 in the case of the deceased?

Thank you.

Hi friends,

Calculation of eligible Gratuity is the same in all cases, be it retirement or death. However, when subscribed to the Insurance-linked gratuity scheme of LIC, premiums towards gratuity for completed years of service and for the remaining period of service are collected by LIC. Additionally, there is additional coverage for the gratuity payable for the remaining period of service of a deceased employee. In that case, the calculation of Gratuity will be as per the formula mentioned by Arun. In other cases, the calculation is as per the message of Alphonse.

Please remember, the maximum Gratuity in all cases is limited to Rs. 3.5 lakhs. Rule 4(3)

Dear Sanjeev,

According to the Payment of Gratuity Act, 1972, the maximum limit for the payment of gratuity amount is Rs. 3.5 lakh.

R.N. Khola