Gratuity Payable - Do we consider her Maternity Leave given from ESI as Service Period?

Kindly give your valuable suggestions on Gratuity Payable. If an employee works for 5 years, he/she is eligible to get Gratuity.

But, what should we do in the below case:

1. A woman employee goes on ESI Maternity Leave by 4.5 years (her service period).
2. After completing 182 days of Maternity Leave, she came and explained that she is unable to come to work as she has to take care of her child. The management also accepted her willingness.
3. When preparing Full & Final Settlement, do we consider her Maternity Leave given from ESI as a service period?
4. Should we provide Gratuity to her or not?

Continuous service will include the days any employee was on authorized leave. Maternity leave refers to the days a woman employee is authorized to take, whether from ESI or from the company. If she has taken 6 months of leave, that period will be considered as a service period for the purpose of deciding gratuity. Therefore, after 4.5 years, if a woman employee goes on maternity leave and returns after the permitted 182 days and then resigns, she should be paid gratuity considering her 182 days as a service period.

Dear Kumaresh,

Yes, keeping in mind the above situation, the employee is entitled to gratuity. Also, you can ask for the notice period or, in lieu of notice period payment, from the employee if the same clause is available in your appointment letter.

Dear Sirs,

Thank you for your valuable time in replying to my query. I will proceed as you advised.

Clarification on Applicability of TDS on Payment of Gratuity.

Company-A was taken over by Company-B in June 2015 under an Operation, Management & Maintenance Agreement (OMMA) along with the Plant & Machinery; and the Employees under a Dual Employment Agreement (DEA).

01 DEA Employee aged 51+ Years has now been inducted into Company-B w.e.f. 01/05/2018, after having Resigned both from Company-A and DEA on 30/04/2018. This employee has a Total reckonable Service of 29 Years... [Company-A: 26 Yrs + Company-B: 03 Yrs].

Now, Company-B wants to settle the Full & Final for the period prior to May-18; and has calculated the Gratuity amount for a Total of 29 Years Service amounting to approx. INR 12.00 Lakhs... [Company-A: Rs. 10.50 L + Company-B: Rs. 10.25 L].

Please Clarify if TDS @ 31.2% is liable to be deducted on the Gratuity amount if:
1. Company-B pays the entire Gratuity for 29 Yrs service period; or
2. Company-B pays their share of Gratuity for 03 Years service under the DEA; or
3. Company-A pays their share of Gratuity for 26 Years of service rendered with them.

The Accounts Dept. at Company-B is treating the Gratuity component of the Full & Final Payment [including Earned Leave (EL) Encashment + Bonus for the last FY 2017-18 and up to Apr-18 this FY] as any other Salary component while clearing the payment thereof.

Sandeep

Dear Kumarsh and Sandeep,
Though the matter already very well explained by Mr Madhu and Mr Manoj, however, pls find attached notification in case you need to show the same as documentary evidence:-
1 Enhancement of Tax free Gratuity amount upto Rs. 20 Lakh. The employer can pay over and above the limit, that only will attrat TDS. Upto Rs. 20 lakh TDS is not applicable.
2 For the purpose of calculating the Gratuity period in case of a female employee “Twenty Six” weeks period will be countable as Service Period.
Thanks.