Hi,

I will be completing 5 years of service in my present company on Feb 16th. Will I be eligible for Gratuity if I resign on Jan 31st and then serve the one-month notice period until Feb 28th? Is the notice period included in calculating the 5-year eligibility period for gratuity, or is it necessary that I submit my resignation only after Feb 16th, i.e., after completing 5 years (before submitting resignation), and then serve the notice period?

Thank you for your help.


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Notice period will be counted as service provided you work during the notice period days. The date of leaving will be the date on which the gratuity actually accrues. Therefore, if you submit resignation in January and get relieved in February, you will be eligible for gratuity.

Regards,
Madhu.T.K

From India, Kannur
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Dear, I will advise you to submit the paper after completing five years. Suppose you resign on 31 Jan after serving notice, and your employer relieves you on the same day. Legally, you are right, but to be on the safe side, it's better to submit it after completing five years.

Thanks,
J. S. Malik

From India, Delhi
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Dear Anuj,

Keep suggestions from both Madhu and Malik in mind. Understand your employer. Your employer might relieve you on the same day for two reasons:

1) Being a long-serving employee, you should be given a free hand for career prospects.
2) As a long-service employee with good rapport with colleagues, you might take people with you.

Better understand the employer and then make a decision.

From India, Coimbatore
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Dear Anup,

Greetings for the day. The above friends are correct, but according to the Gratuity Act, if an employee works in a company for 4 years and 8 months (240 days), then he/she is eligible for gratuity. Please ask Madhu about this.

Regards,
Rajendra

From India, New Delhi
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Dear Sir,

As per the Gratuity Act, a minimum of five years of service is required to be eligible for gratuity. In one case, the Madras High Court has ruled that if someone has completed 240 days in the fifth year, they are eligible for gratuity. However, there has been no amendment to the act.

Thank you.

J. S. Malik

From India, Delhi
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Hi,

It is strange to know that in India, 5 years of service completion is essential for Gratuity eligibility. Here in Pakistan, every employee who completes one year of service is eligible for gratuity. In the mentioned case, the notice period must be included in your job tenure.

Regards,
Sagheer Ahmed
Niagara Mills Pvt Limited
Faisalabad, Pakistan

From Pakistan, Faisalabad
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Labour Laws:

The Payment of Gratuity Act, 1972

Applicability:
All Industries/Commercial Establishments that are registered under the Shops & Establishment Act or Factories Act.

Gratuity Formula:
Last Wage Drawn divided by 26, multiplied by 15, and the whole multiplied by the number of years of service. Wage means whatever you are calculating for EPF purposes.

Eligibility: After completion of 5 years of total service. (For this purpose, 6 months and above can be rounded off to full years of service, and less than 6 months need not be considered). Please remember, for eligibility, it is after 5 years of service, but for payment, the period will be calculated from the date of joining.

In the case of death, this 5 years of service requirement is waived off. This means that if an employee dies after completing 3 years of total service, their nominee is eligible to receive 3 years' worth of gratuity from the organization.

The employer is required to take a Nomination Form as per rules from the employee concerned once they complete one year of service from the date of joining.

Forfeiture or deductions are allowable from the gratuity amount as per the provisions stipulated in the Act.

From India, Coimbatore
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Payment of Gratuity Act, 1972  Provides for payment of gratuity @ 15 days' wages for every completed year of service or part thereof, in excess of seven months  Maximum amount of gratuity payable under the Act was raised from Rs. 1.00 lakh to Rs. 3.50 lakh with effect from 24.9.97  No wage ceiling for coverage under the Act Applicability
  1. Every factory (as defined in Factories Act), mine, oilfield, plantation, port and railway.
  2. Every shop or establishment to which Shops & Establishment Act of a State applies in which 10 or more persons are employed at any time during the year end.
  3. Any establishment employing 10 or more persons as may be notified by the Central Government.
  4. Once Act applies, it continues to apply even if employment strength falls below 10.
Benefits
  1. The quantum of gratuity is to be computed at the rate of 15 days wages (7 days wages in case of seasonal establishments) based on rate of wages last drawn by the employee concerned for every completed year of service or a part thereof exceeding 6 months.
  2. The total amount of gratuity payable shall not exceed the prescribed limit.
  3. In case where higher benefit of gratuity is available under any gratuity scheme of the Co., the employee will be entitled to higher benefit
Calculation of Gratuity
  1. Gratuity = Monthly Salary x 15 days x No. of yrs. of service 26
  2. Max. Gratuity payable under the Act is Rs. 3,50,000/- (w.e.f. 24-9-1997)
Penal Provisions Payment of gratuity (1) 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,- (a) On his superannuation, or (b) On his retirement or resignation, or (c) On his death or disablement due to accident or disease: PROVIDED that the completion of continuous service of five years shall not be necessary where the termination of the employment of any employee is due to death or disablement: PROVIDED FURTHER that in the case of death of the employee, gratuity payable to him shall be paid to his nominee or, if no nomination has been made, to his heirs, and where any such nominees or heirs is a minor, the share of such minor shall be deposited with the controlling authority who shall invest the same for the benefit of such minor in such bank or other financial institution, as may be prescribed, until such minor attains majority.] Explanation: For the purposes of this section, disablement means such disablement as incapacitates an employee for the work which he was capable of performing before the accident or disease resulting in such disablement. (2) For every completed year of service or part thereof in excess of six months, the employer shall pay gratuity to an employee at the rate of fifteen days’ wages based on the rate of wages last drawn by the employee concerned: PROVIDED that in the case of a piece rated employee, daily wages shall be computed on the average of the total wages received by him for a period of three months immediately preceding the termination of his employment, and, for this purpose, the wages paid for any overtime work shall not be taken into account: PROVIDED FURTHER that in the case of 14[an employee who is employed in a seasonal establishment and who is not so employed throughout the year], the employer shall pay the gratuity at the rate of seven days’ wages for each season. Explanation : In the case of a monthly rated employee, the fifteen days’ wages shall be calculated by dividing the monthly rate of wages last drawn by him by twenty-six and multiplying the quotient by fifteen. (3) The amount of gratuity payable to an employee shall not exceed 15[three lakhs and fifty thousand] rupees. (4) For the purpose of computing the gratuity payable to an employee who is employed, after his disablement, on reduced wages, his wages for the period preceding his disablement, shall be taken to be the wages received by him during that period, and his wages for the period subsequent to his disablement shall be taken to be the wages as so reduced. (5) Nothing in this section shall affect the right of an employee to receive better terms of gratuity under any award or agreement or contract with the employer. (6) Notwithstanding anything contained in sub-section (1), (a) the gratuity of an employee, whose services have been terminated for any act, wilful omission or negligence causing any damage or loss to, or destruction of, property belonging to the employer, shall be forfeited to the extent of the damage or loss so caused; (b) the gratuity payable to an employee 16[may be wholly or partially forfeited]- (i) if the services of such employee have been terminated for his riotous or disorderly conduct or any other act of violence on his part, or (ii) if the services of such employee have been terminated for any act which constitutes an offence involving moral turpitude, provided that such offence is committed by him in the course of his employment. DETERMINATION OF THE AMOUNT OF GRATUITY - (1) A person who is eligible for payment of gratuity under this Act or any person authorised, in writing, to act on his behalf shall send a written application to the employer, within such time and in such form, as may be prescribed, for payment of such gratuity. (2) As soon as gratuity becomes payable, the employer shall, whether an application referred to in sub-section (1) has been made or not, determine the amount of gratuity and give notice in writing to the person to whom the gratuity is payable and also to the controlling authority specifying the amount of gratuity so determined. (3) The employer shall arrange to pay the amount of gratuity within thirty days from the date it becomes payable to the person to whom the gratuity is payable. (3A) If the amount of gratuity payable under sub-section (3) is not paid by the employer within the period specified in sub-section (3), the employer shall pay, from the date on which the gratuity becomes payable to the date on which it is paid, simple interest at such rate, not exceeding the rate notified by the Central Government from time to time for repayment of long-term deposits, as that Government may, by notification specify : Provided that no such interest shall be payable if the delay in the payment is due to the fault of the employee and the employer has obtained permission in writing from the controlling authority for the delayed payment on this ground. (4) (a) If there is any dispute as to the amount of gratuity payable to an employee under this Act or as to the admissibility of any claim of, or in relation to, an employee for payment of gratuity, or as to the person entitled to receive the gratuity, the employer shall deposit with the controlling authority such amount as he admits to be payable by him as gratuity. (b) Where there is a dispute with regard to any matter or matters specified in clause (a), the employer or employee or any other person raising the dispute may make an application to the controlling authority for deciding the dispute. (c) The controlling authority shall, after due inquiry and after giving the parties to the dispute a reasonable opportunity of being heard, determine the matter or matters in dispute and if, as a result of such inquiry any amount is found to be payable to the employee, the controlling authority shall direct the employer to pay such amount or, as the case may be, such amount as reduced by the amount already deposited by the employer. (d) The controlling authority shall pay the amount deposited, including the excess amount, if any, deposited by the employer, to the person entitled thereto. (e) As soon as may be after a deposit is made under clause (a), the controlling authority shall pay the amount of the deposit - (i) to the applicant where he is the employee; or (ii) where the applicant is not the employee, to the nominee or, as the case may be, the guardian of such nominee or heir of the employee if the controlling authority is satisfied that there is no dispute as to the right of the applicant to receive the amount of gratuity. (5) For the purpose of conducting an inquiry under sub-section (4), the controlling authority shall have the same powers as are vested in a court, while trying a suit, under the Code of Civil Procedure, 1908 (5 of 1908), in respect of the following matters, namely :- (a) enforcing the attendance of any person or examining him on oath; (b) requiring the discovery and production of documents; (c) receiving evidence on affidavits; (d) issuing commissions for the examination of witnesses. (6) Any inquiry under this section shall be a judicial proceeding within the meaning of sections 193 and 228, and for the purpose of section 196, of the Indian Penal Code, 1860 (45 of 1860). (7) Any person aggrieved by an order under sub-section (4) may, within sixty days from the date of the receipt of the order, prefer an appeal to the appropriate Government or such other authority as may be specified by the appropriate Government in this behalf : Provided that the appropriate Government or the appellate authority, as the case may be, may, if it is satisfied that the appellant was prevented by sufficient cause from preferring the appeal within the said period of sixty days, extend the said period by a further period of sixty days. Provided further that no appeal by an employer shall be admitted unless at the time of preferring the appeal, the appellant either produces a certificate of the controlling authority to the effect that the appellant has deposited with him an amount equal to the amount of gratuity required to be deposited under sub-section (4), or deposits with the appellate authority such amount. (8) The appropriate Government or the appellate authority, as the case may be, may, after giving the parties to the appeal a reasonable opportunity of being heard, confirm, modify or reverse the decision of the controlling authority. Recovery of gratuity If the amount of gratuity payable under this Act is not paid by the employer, within the prescribed time, to the person entitled thereto, the controlling authority shall, on an application made to it in this behalf by the aggrieved person, issue a certificate for that amount to the Collector, who shall recover the same, together with compound interest thereon 26[at such rate as the Central Government may, by notification, specify], from the date of expiry of the prescribed time, as arrears of land revenue and pay the same to the person entitled thereto: PROVIDED that the controlling authority shall, before issuing a certificate under this section, give the employer a reasonable opportunity of showing cause against the issue of such certificate: PROVIDED FURTHER that the amount of interest payable under this section shall, in no case, exceed the amount of gratuity payable under this Act.]

From India, Coimbatore
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Dear All,

Thank you for the valuable suggestions. Can anyone please let me know if an employer can deduct a percentage of gratuity per month from an employee's salary from the date of joining? Can an employer show gratuity as a part of CTC?

Thanks once again and awaiting the replies.

Regards,
APARNA

From India, Delhi
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Hi,

An employee is eligible for gratuity even if he has completed 4 years and 8 months (240 days) in the organization, but there should not be any leave in between this tenure, which will be leave without pay (LWP).

Regards,
Kalpana

From India, Mumbai
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Dear [Name],

Gratuity payable depends on the completion of continuous work for 5 years, i.e., it is a gesture from the employer to pay an amount as calculated for long-service employees who have rendered services to the employer. The last date will be the last date of your work with the company. One of the high courts in India has ruled that the fifth year can be counted as a complete year even if an employee completes 240 days of service with the company. When resigning, one must check whether, by any means, they feel that the company, for any reason, does not intend to pay the gratuity, and they may release you early before the exact date for completing the 5 years arrives.

Kind regards,

[Your Name]


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Hi M Peer i am nishat wanted to know the details of Gratuity calculation thts No of years of service{*15}.... so what is 15 and 26 is stand for ...? kindly reply urgent Thanks and regards Nishat:?:

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You have asked to peer, let me answer too. 26 is the standard number of days in a month taken into consideration when calculating gratuity. This comprises 26 working days and 4 weekly offs.

In Gratuity, you are required to pay 15 days' basic salary for the number of years you have worked, based on the last drawn basic salary. For example, if the basic salary is Rs. 10,000.00 and the years of service are 6, the calculation would be: 10000/26*15*6.

The basic salary is divided by 26 to determine the daily basic wage. To calculate the 15-day amount, it is multiplied by 15, and for the total amount, it is further multiplied by the number of years.

I hope this explanation is clear; however, the peer will also provide their input.

Regards


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I agree with Mr. J S Mallik. It is advisable to put in your resignation after completing 5 years of service. The employer has the full right to accept your resignation on any day during the notice period. They may even accept your resignation on the same day itself. In that case, since you have not completed 5 years of service, you will not be eligible for the payment of gratuity. The calculation of 240 days is only for the purpose of calculating the gratuity amount, but for applicability, 5 years of service should have been completed.

Regards,

UMESH KAPOOR

From India, Mumbai
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Hi Anujcpa,

It is always better to resign after completing 5 years of service. The query raised by you is interesting. If you resign one month before you complete 5 years of service, there is a chance that the employer might relieve you immediately. In this case, the 5 years of service period does not complete.

For gratuity eligibility, an individual has to complete 5 years of service. 4 years & 240 days are not applicable. If an employee completes 5 years & 240 days, gratuity is calculated as 6 years.

Regards,

Nimish Joshi
9969526325

From India, Mumbai
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Hi All,

Gratuity Eligibility: As per the act, an employee will be eligible after 5 years of continuous service in the same organization.

Notice Period: It means you are providing time to your existing employer to seek your replacement in order to avoid any interruption to smooth work. This notice period may vary as per the clause in your appointment letter. If you are working in the notice period, these days will be considered in your service period.

Simply, if you have given a notice period but including your notice period you have completed five years of services from your date of joining, certainly you will be eligible for gratuity.

Thanks & Regards,
Shiv Kumar

From India, New+Delhi
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Dear Aparna,

Gratuity is not a part of salary. It is an amount that the employer should graciously pay to an employee when they leave after serving for many years. In order to clarify the term 'long service,' the Kerala Payment of Gratuity Act (Kerala state was the first to introduce an enactment for payment of gratuity, followed by West Bengal, and only after these two state Acts was a Central Act enacted in 1972) defined 5 years of continuous service, which was accepted by the Central Act. It is simple: gratuity is a reward for 'meritorious service,' although it can be withheld if the employee is found guilty of an offense in the later years of service.

Some establishments show gratuity as part of the salary (CTC) to make the total package offered appear higher, and then deduct the gratuity from the sum offered to determine the actual pay. This practice can lead to serious problems. If gratuity is considered part of the remuneration and deducted from the pay every month, the employer will have to refund the deducted amount to the employee if they leave before completing the stipulated 5-year period. This deduction should be treated like the employee's contribution to a fund, such as the provident fund. Therefore, to be on the safer side, the employer should ensure that gratuity is not displayed as a monthly deduction from the salary. The defense that showing only a "CTC Slip" instead of a salary slip will not be accepted because no labor Act defines the term 'CTC,' and an employer is legally required to provide a 'salary slip,' not a statement showing the costs incurred by employing an employee.

Regarding the requirement of 240 days of work in the fifth year, while there have been court verdicts, there have been no amendments to the basic Act. Therefore, the circumstances that led to the decision in the cited case should be verified and compared with the current situation before making a decision.

Regards,
Madhu.T.K

From India, Kannur
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Dear Madhu TK,

I have some doubts regarding Income Tax (Form 16). I believe you are the best person to help me with my query. Please let me know how I can contact you to clear my doubts. I had already posted my query on citehr on 13-Jan-09 with the subject "INCOME TAX," but I haven't received any replies.

Thank you.

From India, Hyderabad
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Hi Everybody,

Yes, you will be eligible for gratuity even if you submit your resignation on the 31st of January. Your notice period will be calculated in it, even if the employer has accepted and agreed to relieve you from the job. However, make sure that during the notice period, you have completed a term of five years.

Secondly, in the case of a death after one year of continuous service, the person is eligible for gratuity.

Thanks,
Ansari
Mobile: 09967594946

From Qatar, Doha
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Dear Sreelatha,

I regret to say that I am not well-versed in Income Tax matters. Even on matters connected to Labour Laws and Labour relations, I am still a student. My advice is based on my own experiences and situations I faced in my past employment - that too in Kerala, where the employees are more informed about the latest amendments in Labour Acts than the Managers! Well, I didn't see your post on IT. I shall locate it and try to do something. For any matters for which you feel I am confident, you may email me or contact me. My email address and telephone number are: 09847583239.

Regards,
Madhu.T.K

From India, Kannur
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Hi MANOKAVIN,

Gratuity eligibility is 5 years of continuous service. If you serve the one-month notice period until Feb 28th, i.e., you will have to work until February 28, 2009. So they have to calculate the working days until 28.02.2009. You can submit your resignation letter on 31.01.2009 and ask them to be relieved on 28.02.2009 (one-month notice period). You will be eligible for gratuity.

Best regards,
[Your Name]

From India, Coimbatore
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Dear Seniors,

An employee who has died but completed only 3 years of service. Is he eligible for gratuity, and should the calculation be done considering 3 years or 5 years? Also, in calculating gratuity, should basic + DA be taken into account or only basic?

Regards,
Shreya

From India, Mumbai
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Dear All,

The Gratuity Act does not limit the maximum amount that a person can receive in the form of gratuity. Payment of Gratuity Act 1972 Sec. 4 (5) states that an employer can cap their liability to a maximum of Rs. 3.5 lakh per employee, but nothing in the law prohibits them from providing a better benefit than the one mentioned.

Although the Income Tax Act specifies that as long as the gratuity amount does not exceed 8.33% of the employee's annual salary, it is not taxable even if it surpasses the 3.5 lakh limit (Ref. Income Tax Act RR 98 to 111). There are companies that pay gratuity without a cap, meaning an employee can accumulate gratuity as long as they work, even if it exceeds the 3.5 lakh limit.

From India, Kota
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You are entitled to count the period of service of one month under notice period for claiming gratuity. Period of service is totally different from the period of notice. S. Krishnamoorthy
From United States, Roslindale
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Dear Anuj,

The Gratuity Act states that any employee who has served any organization for 5 years is eligible for gratuity under the act. It is also specified that if an employee has served for 4 years and 240 days, he/she is eligible for receiving gratuity payment. Your notice period shall become a part of your tenure while computing your gratuity payment. 5 years shall be counted when considering your date of joining and the last day of your work in the organization.

Thanks,
Amit Anand Gera

Hi, I will be completing 5 years of service in my present company on Feb 16th. Will I be eligible for gratuity if I resign on Jan 31st and then serve the one-month notice period until Feb 28th? Is the notice period included in calculating the 5-year eligibility period for gratuity, or is it necessary that I submit my resignation only after Feb 16th, i.e., after completing 5 years (before submitting the resignation), and then serve the notice period?

Thank you for your help.

From India, New Delhi
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The completed years of 5 years service includes one month notice period.Therefore you will become eligible to receive gratuity amount.
From India, Madras
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Hi,

As per the Gratuity Act, you will be eligible for gratuity even if you submit your papers in January and work for a one-month notice. However, you do not know whether your company allows you to serve the notice period or not. In some cases, it can relieve you with immediate effect by paying in lieu of the notice period to you. Therefore, it is advisable not to take risks with these companies. It is better to submit after February.

Neelima

From India, Hyderabad
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Hi, an employee has every right to withdraw the resignation before its effectiveness despite its acceptance by the competent authority, as per the settled principles of law. Therefore, resignation can be submitted before the completion of 5 years of service but its effectiveness occurs after 5 years. The judgment of the Madras High Court takes into account 240 working days in the 5th year as a completed year of service.

Regards,
Kadalirao

From India, Jaipur
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One of our employee died due to health related problem. He is eligible for gratuity, if yes what is the procedure to claiming gratuity. His doj : 11.05.2017 Death on : 22.07.2017
From India, Bhadran
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If an employee has not served 1 month notice period but completed 7yrs of continuous service , is he/she will be eligible for Gratuity?anyone plz suggest.
From India, Kolkata
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