Understanding Gratuity: Is Your Industry Covered and How Does It Affect Your Pay?

1) Which industries fall under the Gratuity Act? Is it applicable to software IT, telecom, media, publishing companies, etc.?

2) In a company that is more than 5 years old, if some employees have completed 5 years of service but gratuity is not mentioned in their CTC or anywhere, does the company still become liable to pay gratuity for the last 5 years served? If so, how is it calculated and paid?

3) Is gratuity taxable?

4) What is the best time to pay it off?

5) What percentage is gratuity calculated at?

Which industries fall under the Gratuity Act - is it applicable to software IT, telecom, media, and publishing companies as well?

It is applicable to all industries. IT, software, media, and publishing companies all come under this category.

In a company that is more than 5 years old, and some employees who have completed 5 years of service there but do not have gratuity mentioned in their CTC or anywhere, does the company still become liable to pay gratuity for the last 5 years served? If so, how is it calculated and paid?

All employees are covered. There is no need to mention it in the letter; it is a statutory requirement. The payment shall be made within 30 days of quitting/retiring from the company. It includes termination and death as well. The minimum period of 5 years is not applicable in the case of death.

Formula: Last Drawn Basic + DA * 15 * Number of years of completed years of service / 26

Is it taxable?

The maximum ceiling is 3.50 lakhs.

What is the best time to pay it off?

It needs to be paid only after an employee resigns, retires, or is terminated. It is not paid while in service.

What percentage is gratuity calculated at?

It is worked out at 4.1% for calculating CTC.

Siva

Dear Seniors, In some organizations, gratuity is deducted on a monthly basis from employees' salaries. If an employee resigns or is terminated before completing five years, will the deducted amount (gratuity contribution) be settled to the employee or not? Please explain.

Regards,
R. Srinivasan