Hi Vinay...
Let's first understand gratuity:
Noun
gratuity (plural gratuities)
A reward, service, or payment provided freely, without obligation.
(common usage) An additional charge placed for services rendered; see also: service fee.
Source:
gratuity - Wiktionary
Gratuity is a part of salary that is received by an employee from his/her employer in gratitude for the services offered by the employee in the company.
Eligibility: As per Sec 10 (10) of Income Tax Act, gratuity is paid when an employee completes 5 or more years of full time service with the employer.
I'll illustrate with an example:
Suppose you are going to a restaurant for dinner. Having looked at menu, you have had an estimation of the bill that is coming. Accordingly you also know what kind of tip would you leave for the waiter. (Usually we leave a 10-15% tip as a reward for the service given so just an estimate)
Now the tip that you are giving is like a gratuity... You keep aside that money or you make a fund of it so that you know at the end you're to give it to him. You are also aware that if bill rises, you may have to shell out some more and it would also depend on the time that the service is rendered. (One can't pay equal tip to a waiter who has been serving you well for say 5 hours as much as you'd pay to one who was with you for say a couple of hours, right)
Now - though the bill was X and you paid Y as tip, the total cost for food, the total expense you incured on food was X+Y, right.
So understand that CTC is cost to company and they have a right to put up all the cost in your ctc that they spend for you or give you (either in cash or kind or whatever means)
Deduction is different. Deduction means it is a part of salary but has legal deduction implications. Deductions would include your PF, Professional tax, TDS, deductions against advance salary / loan availed, etc.
I hope you're clear on the fact that Gratuity & Deductions are different.
Now coming to your point - Payment of Gratuity even if we leave before 5 years of service.
See this again with the same hotel example.
Paying of tip is not obligatory. In simple words, it is not a golden rule to pay a tip to a waiter, as it is his duty to serve us and is paid for it by his employer. But we pay a tip for the good service they provide us, out of good will.
So gratuity is not an obligation on employer's part. It is just like a reward. You can't force someone to give you a reward, right...
Another thing... say for eg. the waiter was not with you all the time, he didn't give you welcoming experience, the service was not to the mark, lot of wait time and food not that great, service and etiquette not that great, you don't put a tip.
In a similar fashion how can we expect our employers to pay us a gratuity when we are not providing them continuous service.
More so, even the law or the gratuity Act says - we become eligible only after 5 years of service. However if somone is resigning after a min of 4.8 years of service is eligible to claim gratuity. Again if an employee meets accident and is fully incapable of performing task or meets death while in employment even before 5 years, the employer pays him/her gratuity for the served period in those exceptional cases even before 5 years.
(Pls note that I didn't mean to compare you with a waiter, it was only the best and simplest example i could think of to explain this thing. Pls don't take it personally)
Also read foll for better understanding
1.
What is Gratuity - Understanding Taxes
2.
All you want to know about gratuity
3.
Clarity between gratuity eligibility service (5 or 4.8 yrs)? - Labour & Service Law Forum - Law, Lawyers, Advocates, Law Firms,Legal Help, Legal Experts,Judgements,Law Help, Indian Lawyers
For any further clarifications, pls feel free to post :)
Wish you luck. Hope it helped. :)