Gratuity in CTC: Can You Claim It Back Before 5 Years of Service in IT Firms?

Hi all,

If gratuity is a factor in the CTC for an IT firm, can an employee get back the amount deducted without completing his 5 years of service with the organization?

Regards,
Visha

Hello Visha,

The gratuity is payable before the 5 years of completion with any organization only if an employee dies or gets permanently disabled, then he or his family will receive the amount of gratuity. Additionally, some companies operate on a Cost to Company (CTC) basis, which means that gratuity is a part of their salary package itself; in such cases, the amount is payable at the time of resignation as well.

Anal Shah

Gratuity is paid on account of five years' continuous service (or less if service is interrupted by death). Gratuity paid up to and including Rs. 3.5 lakhs is tax-free, and gratuity paid beyond such a figure attracts tax.

Gratuity paid for service under five continuous years, if allowable by company policy, can be paid, but the whole amount would attract tax, and no portion would be tax-free.

Correct me if I am wrong.

Jeroo

Hi Visha,

I fully agree with the comments by Jeroo Chandiok. However, I feel that your query was not answered:

"If the Gratuity is a factor in the CTC for an IT firm, can an employee get back the amount deducted without completion of his 5 years of service with the organization."

The answer is no. The reason being the good intent of the employer wherein the deducted amount is contributed to the Gratuity fund as maintained by the Company through the Insurance companies like LIC, etc.

There has been a debate here in this column on this subject; I would recommend using the search tool on the top left.

Regards, Rajat

Yes, Rajat is right. Once after posting my comment here, I got to know by discussing this with some seniors in HR that Gratuity amount is taken care of by the central government (LIC sort of companies) for better investments, but there are no companies. The formula for calculating the gratuity is (last drawn basic/26) * 15, and the maximum limit is ₹3,50,000/- as said by Rajat. However, paying something more than the law is not an offense, so companies do pay higher than that also. Thanks to Rajat.

Regards,

Hi, this is Pragadeesh. Many people are asking if it is possible to get back the money within 5 years.

With regards,
Pragadeesh