Understanding Gratuity Limits: How Much Can You Actually Receive?

Dear All,

Can you help me? What is the limit of gratuity?

Regards,
Tribikram

Dear Sir,

The maximum amount an employee can receive towards gratuity is Rs. 3,50,000/-.

P. M. Patel

Dear Sir,

I am a fresher to the Industrial World. I don't know what Gratuity and PF are. How do they differ from each other, sir? It would be grateful if you could clarify for me.

Best Regards,
K. Murugan :)

Hi Murugan,

PF is the pension amount received after retirement, and Gratuity is what you get after completing 5 years of continuous service in the same organization. Kindly let me know if I am wrong.

Thank you,
Pratibha

Hi Murugan,

What Prathibha said was right. Gratuity can be payable to the employee who completes five years of service in the company. Gratuity means a GIFT OF MONEY. The maximum amount of gratuity is ₹3,50,000. But I am not sure whether the amount is correct or not!!!

Gratuity should be paid when the firm has 10 or more employees. In a specific time, when employees are less than 10 also, the company is responsible to pay the gratuity.

On the other hand, PF (Provident Fund) is a deduction from the employee's salary. It applies to companies whose employees are 20 or more. The main intention of PF is social security. A separate account in the name of the employee will be created in the PF's Office. The deduction of PF is 12% of the basic salary. The employee can withdraw his/her amount on resignation, retirement, termination, etc.

Hope you get a little idea. If you need more information, refer to the acts.

Regards,
Subha

It's 350,000/-. Should be withdrawn only once in a lifetime. Else, it will be taxable.

In your career, you cannot withdraw Gratuity from multiple employers. For example, if you worked with three companies for a long enough period to get Gratuity, you cannot get 350,000/- from each employer.

Regards,

Sanjeev Sharma

Dear All,

The maximum gratuity payable under Subsection (3) of Sec. 4 has been revised to Rupees Three Lakhs and Fifty Thousand, effective from 24-9-1997, vide Act 11 of 1998, published in the Gazette of India, Pt. II, Sec. 3, Subsection (ii) dated 21st July 1998.

Regards,
Suresh Ramalingam
Consultant - Compliance

Dear All,

Friends, please advise whether, as per the norms of the company, the annual benefits like LTC, medicals are paid/reimbursed as agreed by the employer, or if they are paid excluding the loss of pay/leave without pay days.

For example, if my annual LTC amount is Rs. 25,000/-, will I receive the entire amount at the end of the financial year (subject to tax)? If I am on LOP for 1 month, will I be paid an amount deducting the respective amount for the LOP from Rs. 25,000/-?

Please advise.

Dear All,

I think gratuity varies in different organizations. In my organization, gratuity is calculated as one month's gross salary per year, which will be payable to you at the time of your resignation or retirement. There is no limit to the amount of gratuity, as it could be more than 350,000/-

Regards,
Aisha

The employee should complete 5 years in the same company to be eligible for gratuity. Gratuity is calculated as 15 days' salary for every completed year of service. If an employee resigns after serving the company for 5 years and 6 months, he will be eligible for gratuity for a total of 6 years. If he has completed 5 years and 4 months, he will be paid for 5 years.

Formula for calculating gratuity: G = (15/26) * (Basic salary last drawn + DA per month)

Dear Aisha,

Gratuity doesn't differ from company to company. If you want further clarification, please go through The Gratuity Act - 1972 in the Labour Laws Book.

Actually, the gratuity amount is calculated as 15/26 x last drawn salary x number of years of service, or Rs. 3,50,000, whichever is more, but not exceeding Rs. 3,50,000. This amount will be given to the employee at the time of his retirement (i.e., 58 years completed). If he resigns from his employment, the amount will be adjusted based on his years of service.

Regards,
N. Arumugam

Dear Suresh,

I want to ask, if I have completed 10 years in the first organization, in the last year when I claimed my gratuity, my basic pay is Rs. 40,000 per month. I received Rs. 2,00,000.00 as gratuity. Then, after another 10 years in the next company at the same salary rate, at the end of my service, I will only receive Rs. 150,000. I am not clear on this. Please help me.

An employee can receive more than what is provided under The Payment of Gratuity Act, which is currently Rs. 3,50,000. However, there must be an agreement, award, or settlement between an employer and employee providing a higher quantum of gratuity than that under the PGA. The PGA includes a provision that allows for better terms of gratuity payment than itself. I hope this clarifies the position.

P.M. Patel

Dear Medical and LTA are fixed amounts and have nothing to do with your leaves. If you are signing off the services with the company, it will be considered.

Rajashree

Hi Tribikram,

Gratuity is payable to any employee on successful completion of five years of continuous employment in the same organization. It is calculated as half of the last drawn basic salary multiplied by the number of years of service, divided by 26.

For example, if I leave my organization in the sixth year and my basic salary is Rs. 10,000, the calculation would be: 10,000 * 15 * 6 / 26 = Gratuity, which cannot exceed more than Rs. 350,000.

Regards,
Shiva

Subject: Proposed Revision of Gratuity Ceiling

Hi N.V. Rao,

I would like to inquire about the proposed revision of the gratuity ceiling from the current limit of Rs. 350,000. I have heard that it might be increased to Rs. 1,000,000. Can you confirm if this information is accurate?

Thank you,

N.V. Rao

Dear All,

There is a proposal to revise the maximum payment of Gratuity from 3,50,000 to 10,00,000/-. As of now, there has been no amendment or notification. Once the notification is published in the official gazette, the existing provision will be applied (Rs. 3,50,000/-).

Regards,
Murugavel.B
Chennai

Hi Tribikram,

Please note that the gratuity amount must not exceed Rs. 3,50,000. For government employees, any amount of gratuity received is totally exempt from tax.

However, for non-government employees, please consider the following points:

1) For non-government employees covered under the Payment of Gratuity Act, 1972, tax exemption is based on the following:

a) 15 days' salary last drawn for each completed year of service (15 days salary x length of service) - salary amount x 15/26.

If the period of service is 6 months or less, please ignore it. If it's more than 6 months, consider it as 1 year.

b) Rs. 350,000
c) Gratuity actually received

2) For non-government employees not covered under the Payment of Gratuity Act, 1972, tax exemption is based on the following:

a) Rs. 350,000
b) Half month's average salary for each completed year of service
c) Gratuity actually received.

I hope the above points help clarify your doubts.

Thank you and regards,

Ayona

The maximum amount of gratuity is Rs. 10,00,000/- for an employee based on the service they have provided to the company, with a minimum of 5 years of continuous service.

Regards