Understanding Gratuity Limits and Daily Wage Calculations: Can You Clarify These Points?

Dear Friends,

I have some issues to clarify and will be grateful for any help:

1. After 1997, is it mandatory that all organizations covered by the Gratuity Act follow the upper limit set by the law, i.e., Rs. 3.5 lakhs?
2. If the written rules and regulations of the organization framed in 1998 set the upper limit of the Gratuity as (say) Rs. 2.5 lakhs - the older upper limit, then is it sufficient to pay only Rs. 2.5 lakhs? (Rules are like Standing Orders, right?)
3. What is the basis for calculating the daily wage as if the month consisted of 26 instead of 30 days?

Thanks with regards.

Answer for Q3: The basis for calculating the daily wage as if the month consisted of 26 instead of 30 days is as follows:

Step 1: Computation of Salary:
Salary = Basic Salary + Dearness Allowance (Salary refers to the last drawn salary).

Step 2: Taxable Gratuity:
Amount received as Gratuity
Less: Exempt under section 10(10) - the least of the following:
i. Actual Gratuity Amount received by the individual.
ii. 15/26 x Last Drawn Salary x Number of years of completed service or part thereof in excess of six months.
iii. Notified amount (i.e., Rs. 3,50,000/-).

Any rule already in force will be superseded by an amendment in the basic Act. As such, when the gratuity amount has been increased to Rs 3.5 lakhs, the old standing order to restrict gratuity to Rs 2.5 lakhs has become stale and will not be in effect.

Regards,
Madhu.T.K