Can gratuity be calculated on Allowance like H.R.A., C.A, MED. ETC.
From India, New Delhi
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From India, New Delhi
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Can gratuity be calculated on Allowance like H.R.A., C.A, MED. ETC.
From India, New Delhi
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From India, New Delhi
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Hi, For the calculation of gratuity, salary includes only Basic salary and Dearness Allowance (DA). There won’t be any other components that will be considered for the calculation of gratuity.
From India, Madras
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1015From India, Madras
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In our country, the original salary structure consisted of Salary (such salary was called Basic Salary) plus D.A. (Dearness Allowance), wherein payment of D.A. was directly linked to the Consumer Inflation Index and was variable. Therefore, all attendant benefits like Provident Fund, Employees Insurance, Gratuity, and Bonus were attached to the Basic Salary.
The same practice was adopted by the private sector but replaced D.A. (Dearness Allowance) with Special Pay.
Thereafter, HRA (House Rent Allowance) was made exempt under the Income Tax Act with certain conditions. HRA between 10% and 40% of Basic Salary (in the case of Metro Cities) and between 10% and 30% of Basic Salary (in the case of Other Cities) was made exempt if the employee is staying in rented accommodation and is paying rent equal to or more than that.
Similarly, later on, Conveyance Allowance of Rs. 1600/- per month was also made exempt under the Income Tax Act. Therefore, the special pay was further split into HRA, Conveyance Allowance, and Special Pay.
As payments other than Basic Pay plus D.A. are all under the category of allowance, gratuity shall be payable on Basic Pay plus D.A. only and not on any other allowance, in whatever name called or spelled. Even in the above, special pay is also not included in basic pay for the calculation of Gratuity.
Regards, Jawaharlal Moondra
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From India, Jodhpur
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The same practice was adopted by the private sector but replaced D.A. (Dearness Allowance) with Special Pay.
Thereafter, HRA (House Rent Allowance) was made exempt under the Income Tax Act with certain conditions. HRA between 10% and 40% of Basic Salary (in the case of Metro Cities) and between 10% and 30% of Basic Salary (in the case of Other Cities) was made exempt if the employee is staying in rented accommodation and is paying rent equal to or more than that.
Similarly, later on, Conveyance Allowance of Rs. 1600/- per month was also made exempt under the Income Tax Act. Therefore, the special pay was further split into HRA, Conveyance Allowance, and Special Pay.
As payments other than Basic Pay plus D.A. are all under the category of allowance, gratuity shall be payable on Basic Pay plus D.A. only and not on any other allowance, in whatever name called or spelled. Even in the above, special pay is also not included in basic pay for the calculation of Gratuity.
Regards, Jawaharlal Moondra
[Email Removed For Privacy Reasons] [Phone Number Removed For Privacy-Reasons]
From India, Jodhpur
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