Not many people doing jobs are well aware of gratuity. Just heard the name. But it is an important fund for an employee. Actually, the gift given by the company to the employee in return for working for years is called “Gratuity”.
Not many people doing jobs are well aware about gratuity. Just heard the name. But it is an important fund for an employee. Actually, the gift given by the company to the employee in return for working for years is called “Gratuity”.
A small part of the gratuity is deducted from the salary of the employee, but a large part is given by the company.
Think of it as
When the employee leaves the company after working for a long time, then he is given gratuity in addition to pension and provident fund.
Usually gratuity is available after retirement, but, if you are changing jobs or leaving midway, you can take gratuity earlier even after fulfilling certain conditions.
4 years, 10 months, 11 days:
If the employee fulfills certain conditions of the job, then the payment of gratuity will be guaranteed to him according to a prescribed formula.
According to the Payment of Gratuity Act, 1972, gratuity is given to any employee who has worked in the service for 4 years, 10 months, 11 days in a row.
Because only after five years of service, any employee becomes entitled to law gratuity. According to the current system, if a person has worked in a company for at least 5 years, then he is entitled to gratuity.
Payment of Gratuity Act, 1972
Under the Payment of Gratuity Act, 1972, this benefit is available to every employee of an organization where more than 10 employees work.
If the employee changes job, retires or leaves the job due to any reason, but he fulfills the rules of gratuity, then he gets the benefit of gratuity.
Calculation of Gratuity:
If you want to calculate gratuity, then you must know about the previous salary and the period of service.
Formula to calculate gratuity = (15 X previous salary X working hours) / 26
Here the previous salary means basic salary, dearness allowance and commission on sales.
Suppose, your previous salary is Rs 60,000 per month and you have worked in a company for 12 consecutive years, then your gratuity can be calculated like this
Gratuity = (15 X 60,000 X 12)/26 = Rs 4,15,385
That is, after doing 12 years of service, your gratuity will be Rs 4,15,385.
Is gratuity taxed?
Under Section 10(10) of the Income Tax Act, an amount up to Rs 20 lakh received by a company or any institution as gratuity to an employee is tax-free. Earlier gratuity up to Rs 10 lakh was tax-free.
