Merits and demerits of paying gratuity as a monthly component in salary?

Dear Msmoorthy ji,
I failed to understand your last post.
I wish to bring more clarity in subject matter as under.
This Section of compulsory insurance was inserted in the Act by Act No. 22 of 1987 with effect from 1.10.1987 giving liberty to the appropriate Governments to notify the date of coming into effect of the said Section.
This Section clearly states which is given verbatim as "With effect from such date as may be notified by the appropriate Government in this behalf, every employer, ....."
You have uploaded a notification of AP. Likewise, there is no notification by GOM till date.
Also, you stated that the notification uploaded by you of AP Govt is applicable to TS. This can not happen. Each State Govt has to come out with notification like AP Govt.

Please read the attachment sent by me "THE GRATUITY ACT, 1972
The Payment of Gratuity (Maharashtra) Rules, 1972." . Section 4A clearly stipulates for the ibid provision, with out any clause of if & buts.
(Why are we getting confused with Act 22 insertions etc?).
As regards AP notification (of combined state) pertains to a period prior to the split of AP & TS and the Acts / Rules and GOs etc of combined state are made applicable mutatis mutandis for both states, unless other wise explicitly cited. Please seek a clarification from respective state Govt officials and if your point of view is ratified from the Govt authorities every one will accept your viewpoint and be thankful for the clarification.

Dear Msmoorthy ji,
As regards to the second part of your post#22 above, you are correct which I said earlier also. There is a notification by AP Govt giving force to implement the amendment of 1987 in Section 4A. However, I misunderstood TS as Tamilnadu State.
There is no need to seek clarification from State Govt Officials on the subject matter. I am practising in Maharashtra since so many years and I know how many Govt Officers in Maharashtra from Labour Department has knowledge on Labour Law subjects.
When a person like Mr. Saikumar who is practising HR & Labour Relations Adviser since couple of decades in Maharashtra concur with my views, there is no need to seek clarification from any other person.
I have a bare Act with me right now with Maharashtra Rules, updated and when I say something I say it with due study on the subject. Some time I also may go wrong and I learn from the wrongs.
Amendment of 1987 in Section 4A of POG Act is very clear. It has a condition stating - "with effect from such date as may be notified by the appropriate Government in this behalf, every employer.....".
From my side I conclude this subject with no further post on this subject.

All you learned people,
Thanks a lot for your detailed inputs. It has given me enough explanation to present it further to my manager.

Sirs,
How to counter a Labour Contractor, for say providing Security Services / Personnel, who collects the Gratuity amount from the company and releases a contractual employee before completion of 5 years (eligibility) service; and pockets his gratuity amount ?
What are the options available to the Company, the principal employer ?

Re-Posted......
Sirs,
How to counter a Labour Contractor, for say providing Security Services / Personnel, who collects the Gratuity amount from the company and releases a contractual employee before completion of 5 years (eligibility) service; and pockets his gratuity amount ?
What are the options available to the Company, the principal employer ?

Dear Sandeepsahni,
If it is a pure manpower contract, in such case you can exclude the gratuity amount from the contractor's monthly costing. Ask the contractor to submit quote/bill without gratuity component. Pay the gratuity amount on basis of actual working/payment agst documentary evidence (only when the employee complete 05 years of service).
However, in case of transferable service it is little bit difficult to identify the period, specially in security contract you can’t predict / calculate the service period, as this is movable nature job. May be the employee worked in other organization from long back and deputed at your site for a short period and then left the job. In such case the contractor is liable to pay gratuity, even though the employee has not completed 05 years with you. Even in such case/s also you can ask the contractor to raise separate bill for the period for which the employee deputed at your location. The balance amount (other location) contractor will be bear.
Hope my point is cleared to you, experienced member can put more light on the matter.

If gratuity is paid every month with salary then it will become taxable under Income Tax Act, 1961. However when gratuity is paid as lump sum on retirement then certain amount is non taxable. This amount which will not attract income tax is likely to be enhanced to INR 20 Lakhs.

Dear Mkpande1,
I just add to what you said.
If Gratuity is paid every month, then it is not a gratuity as per POG Act and it is a part of his monthly salary. Also the employee will certainly have claim over the Gratuity as per the POG Act on his separation after completing 5 years of continuous service. Section 4 of the Act says that the Gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than five years.
When any payment is due on termination how one can pay it before termination on monthly basis? This kind of questions should not come from HR fraternity.
Mind well, this will be an additional burden for employer.

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Regards
Adv. Sneha