Understanding Gratuity Calculation: Should Dearness Pay Be Included for Teachers?

Respected Seniors,

Salary Components

My salary components are as follows:
- Basic Pay - Rs. 9100
- Dearness Pay - Rs. 4550
- Dearness Allowance - Rs. 17336
- Total - Rs. 30986

And other allowances such as HR, CCA, Medical allowance, etc.

Gratuity Calculation Under the Gratuity Act

Gratuity, under the Gratuity Act, is payable on the last drawn salary basis. Please advise whether Dearness Pay should be taken into consideration when computing Gratuity. Furthermore, I have completed 36 years of service. Is there a limit to the service duration under the Act? If so, what is the formula for calculation? I am employed as a teacher in an unaided minority private school in Delhi. The limit under the Gratuity Act has been amended to Rs. 10 lakh from Rs. 3.50 lakh. Am I entitled to an enhanced payment under the Act?

Regards,
Sukhi

Gratuity Calculation Basics

Gratuity is calculated on Basic + DA. It's calculated for 15 days of a year's salary, i.e., last drawn salary * 15 * service years / 26. As per the Gratuity Act, 26 days are taken for 1 month of service, with 4 days being off days.

Gratuity Limit and Taxation

The gratuity limit is ₹10,00,000/-. It can be paid more than 10 lakhs, but any amount exceeding 10 lakhs will be paid under a different head, not as gratuity, as the maximum ceiling is 10 lakhs. Any amount over 10 lakhs is taxable.

Entitlement to Amended Gratuity Value

Yes, you are entitled to avail the amended value, i.e., 10 lakhs. Up to now, you have 36 years of service, so the total service years for you are 36, with no limit on service.