GUJARAT EMPLOYEE WILL GET 20 LACS GRADUITY - OFFICIAL PRESS NOTE.
What is Gratuity ? How can Calculate Gratuity ?
The Payment of Gratuity Act, 1972
Payment of Gratuity Act, 1972. An Act to provide for a scheme for the payment of gratuity to employees engaged in factories, mines, oilfields, plantations, ports, railway companies, shops or other establishments and for matters connected therewith or incidental thereto.
In India gratuity is a type of retirement benefit. It is a payment made with the intention of helping an employee monetarily after his retirement.
Payment of Gratuity Act, 1972 - Chief Labour Commissioner
The Payment of Gratuity Act, 1972 has divided non-government employees into two categories. Gratuity is given by the employer to his/her employee for the services rendered by him during the period of employment. It is usually paid at the time of retirement but it can be paid before provided certain conditions are met.
The Payment of Gratuity Act, 1972 (the Gratuity Act) is applicable to employees engaged in factories, mines, oilfields, plantations, ports, railway companies, shops or other establishments with ten or more employees.
What is Meant by Gratuity?
Gratuity is a benefit which is payable under the Payment of Gratuity Act 1972. Gratuity is a sum of money paid by an employer to an employee for services rendered in the company. However, gratuity is paid only to employees who complete 5 or more years with the company. It can be understood as a form of tip paid by employer to the employee for services offered in the company. Since tips are a function of culture, various countries have various gratuity limits that are doled out by employers.
Explore our other pages to know more about Income Tax, Income Tax Calculator, e-Filing Income Tax, Income Tax Slabs and Income Tax Return.
How does Gratuity Payment Work?
An employer may offer gratuity to his/her employees from his/her own pocket or may take a group gratuity plan with an insurance provider. Annual contributions are then paid by the employer to the insurance provider for this. The employee too can contribute to his/her gratuity amount. The gratuity paid by the insurance company is based on the clauses in the group insurance scheme.
PEOPLE ALSO ASK
How gratuity is calculated?
What is gratuity salary?
How does gratuity work?
What is the eligibility for gratuity?
Eligibility Criteria for Gratuity Payment:
Following are the few instances when you will be eligible to receive gratuity.
An employee should be eligible for superannuation
An employee retires
An employee resigns after working for 5 years with a single employer
An employee passes away or suffers disability due to illness or accident
Example of Gratuity Calculation:
For example, if Amit is an engineer who has worked with SF Company for 20 years of service and had Rs.25,000 as his last drawn basic plus DA amount, then,
Gratuity Amount for Amit = 20*25,000*15/26 = Rs.2,88,461.54
However, an employer can choose to pay more gratuity to an employee (since it is a form of tip as mentioned in the beginning) but then the amount as restricted by the Gratuity Act cannot exceed more than Rs.10 lac. Anything above the amount Rs.10 lac is known as ex-gratia which is a voluntary contribution and not something compulsorily imposed by the law.
Also, for the number of months in the last year of employment, anything above 6 months is rounded off to the next number while anything below 6 months in the last year of employment is rounded off to the previous lower number. So, a job held for 6 years 7 months will fetch you gratuity amount for 7 years while that held for 6 years and 4 months will fetch you gratuity amount for 6 years.