Union Budget 2025: Central trade unions have demanded the Finance Minister to review the rules of gratuity calculation so that employees can get more gratuity.
Gratuity Calculation Formula In India: On February 1, 2025, employees working in private or public sector can get a big gift. If the Central Government accepts the suggestions of the trade unions, then it is possible that you may get more gratuity on retirement or on resigning from the company after working continuously for 5 years. In the pre-budget meeting with Finance Minister Nirmala Sitharaman, Central Trade Unions have reviewed the Gratuity Calculation Rules and demanded changes in it so that workers and employees can get more gratuity on retirement.
There will be a change in gratuity calculation
The Central Trade Unions have submitted their demands to the Finance Minister regarding the budget to be presented on February 1, 2025, demanding that the government review the rules for gratuity calculation. These organizations have asked the Finance Minister to increase the gratuity payment calculation from 15 days’ salary of a year to one month’s salary so that workers and employees can get more gratuity on retirement. Not only this, the Central Trade Unions have also asked the Finance Minister to remove the fixed limit of Rs 20 lakh for gratuity payment. Under the current rules, the maximum limit of gratuity payment is Rs 20 lakh and no income tax is to be paid on this amount, that is, this amount is completely tax-free.
What is gratuity?
Gratuity is the amount that is given to the employee as a mark of respect for the services rendered by him to his employer. This is given to the employee in return for the long-term services rendered to his organization on his retirement or on leaving the company after a period i.e. 5 years. Gratuity is a component of the gross salary of any employee but it is not given regularly. Rather, a lump sum payment is made when the employee leaves the company.
How is gratuity calculated!
Gratuity is calculated on the basis of the salary of the employee or worker and it is decided separately for each employee as per the company policy. To get gratuity, it is necessary to serve continuously for at least 5 years in any company. However, this rule does not apply if the employee dies or becomes disabled. To calculate gratuity for a period of 5 years, 240 days in a year are counted as working days. The formula for gratuity calculation is as follows.
(15 x last month’s salary x total number of years of service) / 26
In this, gratuity is paid on the basis of 15 days’ salary. The last month’s salary includes Basic Salary along with Dearness Allowance. And 26 means 30 days of the month, which does not include four Sundays.
When is gratuity given?
- When any employee retires from service
- When he is eligible for retirement
- When he resigns after serving the same company continuously for 5 years
- When an employee dies or becomes disabled due to illness or accident
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