Gratuity
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GRATUITY. Introduction. Paid for faithful continuous service in the organization Payable on completing 5 years of continuous service with the organization Includes probation period The above rule is waived of in the eventuality of Death Permanent disablement. Applicability.

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GRATUITY

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Gratuity

GRATUITY


Introduction

Introduction

  • Paid for faithful continuous service in the organization

  • Payable on completing 5 years of continuous service with the organization

    • Includes probation period

  • The above rule is waived of in the eventuality of

    • Death

    • Permanent disablement


Applicability

Applicability

  • Applicable to those organizations where employee strength is more than 10


Family

Family

  • Himself/ Herself

  • Spouse

  • Children (married or unmarried)

  • Dependent parents

  • Dependent in-laws

  • Widow & children of predeceased son

  • Adopted children


Definitions

Definitions

  • Superannuation

    • Attainment of age for vacating employment

  • Retirement

    • Termination of employment other than superannuation

  • Wages

    • Earned while on duty or on leave.

    • Includes DA

    • Does not include bonus, HRA, overtime, commission etc.


Payment of gratuity

Payment of Gratuity

  • Gratuity can be paid to an employee when

    • He is superannuated

    • Resigned/ retired after 5 years of continuous service

    • Permanent disablement

    • Death

  • If a person has completed 240 days in a year on his/ her fifth year of service, he/ she is eligible for gratuity


Calculation

Calculation

  • The formula for calculating gratuity is as follows –

    [(Salary*15)/26]*service period

    Where,

  • Salary = Basic + DA


Calculation of gratuity in ctc

Calculation of gratuity in CTC

  • 5% of basic salary

    • In some cases it is actually 4.81% which is rounded up to the nearest integer


Taxability

Taxability

  • Not taxable up to the ceiling of 3.5 lakhs.

  • Any amount above the same will be taxable.

  • The ceiling is applicable only once during the entire service period

    e.g.: If the person changes his job more than once, then he will avail the benefit of tax savings upto 3.5 lakh only once.


Withdrawal of gratuity

Withdrawal of gratuity

  • Non transferable

  • The LIC draws a cheque in the favor of the organization/ Gratuity Trust

  • In turn draws cheque in favor of the employee


Forms to be filled

Forms to be filled


Forms to be filled1

Forms to be filled


Forms to be filled2

Forms to be filled


Forms to be filled3

Forms to be filled


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