Gratuity Rules: For those who have been working in the same company for a long time, it is very important to know that they are entitled to gratuity. When leaving the company, they are given gratuity as financial benefits. In India, gratuity is regulated under the Gratuity Payment Act, 1972, under which employees receive a lump sum in leaving jobs or retirement.
What is gratuity?
The company offers a specific fund to the employee from its own fund to work in the same company for at least five years or more. This fund is available on retirement or leaving job. In which maximum Rs. Gratuity up to Rs 20 lakh can be obtained. It is necessary to provide gratuity to the company where at least 10 or more employees are employed. It is noteworthy that central government employees are entitled to a maximum of Rs 50 lakh per month pension. Gratuity of up to Rs 25 lakh can be found.
Return in this case is possible
To get gratuity, any employee will have to work in the same company for at least five years. However, if an employee dies unexpectedly or suddenly loses physical capacity, in such a situation, even if he has worked for less than five years in the company, he still gets the benefit of gratuity. Gratuity is available in retirement, resignation, job dismissal, or employee death or disability.
Calculation can be done in two ways.
The gratuity is calculated based on the last salary and years of service of the employee. It has two ways. One for the employees under the Gratuity Act and the second for the employees not coming under this Act.
How to calculate
If the employee falls under the Gratuity Act, he has to follow this formula:
Suppose, the final basic salary and dearness allowance of the employee is a total of Rs. He earned Rs 50,000 and worked for 10 years.
Gratuity = (final salary × 15 × service duration) / 26
(50,000 × 15 × 10) / 26 = Rs. 2,88,461.54
If the employee does not fall under the Gratuity Act, he will have to follow this formula:
Gratuity = (final salary × 15 × service duration) / 30
(50,000 × 15 × 10) / 30 = Rs. 2,50,000
How much do I have to do?
Taxes on gratuity are different for government and private sector employees. If there is a government employee, the gratuity for him is completely tax-free. Whereas under the Gratuity Act for private sector employees, Rs. Gratuity up to Rs 20 lakh is tax free.
The gratuity is obtained from the company’s fund.
Employees get the benefit of gratuity from the company’s funds. For this, no amount is deducted from the salary of the employee. Maternity leave and other latest holidays are also counted in a five -year job. Any employee can nominate anyone for his gratuity. If an employee dies during duty or he becomes disabled, then the amount of gratuity is immediately deposited in his account.
