Gratuity Rules: Are you also planning to leave your job but are waiting for the completion of five years? Till now most of the employees have been assuming that any employee gets gratuity only when he completes 5 years of continuous job. But let us tell you that this is not so.
Gratuity Rules: Are you also planning to leave your job but are waiting for the completion of five years? Till now most of the employees have been assuming that any employee gets gratuity only when he completes 5 years of continuous job. But let us tell you that this is not so. Here we are telling you the rules related to gratuity.
Gratuity
In many companies, gratuity is a part of the employee’s CTC (Cost to Company). According to the Gratuity Payment Act 1972, an employee has to complete at least 5 years of continuous service to get gratuity. But very few people know that in some situations, gratuity can be received even before 5 years. If you have completed 4 years and 240 days before 5 years, then you may be entitled to gratuity. In such a situation, it is beneficial to calculate your service period before leaving the job. If the company refuses to pay gratuity, you can file a complaint with the Labor Department or Court.
Gratuity can be received in 4 years and 240 days
According to experts, if an employee completes 4 years and 240 days in a company, he is eligible to get gratuity. For example, if an employee has joined a company on 1 January 2021, he can get gratuity even if he resigns on 29 August 2025.
What are the rules for getting gratuity
The 190-day rule applies to employees who work in mines or in companies that work less than 6 days a week. The 240-day rule applies to all other employees. If an employee has completed 240 days in the 5th year, it will be considered as 5 years of full service. Gratuity will be paid in such a case.
Can the company refuse to pay gratuity?
High Courts (HCs) have given different verdicts in such cases. According to Delhi and Madras HC, the employee is eligible for gratuity after completing 4 years and 240 days. However, Karnataka HC has said that this rule applies only in certain circumstances, such as illness, accident, leave, etc. If the employee resigns voluntarily, he will have to complete the full 5 years.
How is gratuity calculated?
This is the formula for gratuity calculation
(15 X last salary X service period) / 26
For example, if the last salary of an employee is Rs 40,000 and he has worked for 4 years and 300 days. It will be considered equal to 5 years. How is gratuity calculated in such a case. So according to the formula, gratuity will be Rs 1,15,385.
(15 X 40,000 X 5) / 26 = Rs 1,15,385
Is there tax on gratuity?
According to the government rules, gratuity up to Rs 20 lakh is tax free. If the employee gets gratuity of more than Rs 20 lakh, then tax will have to be paid on the amount above Rs 20 lakh.
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