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


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

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


Family

  • Himself/ Herself

  • Spouse

  • Children (married or unmarried)

  • Dependent parents

  • Dependent in-laws

  • Widow & children of predeceased son

  • Adopted children


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

  • 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

  • The formula for calculating gratuity is as follows –

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

    Where,

  • Salary = Basic + DA


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

  • 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

  • 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 filled


Forms to be filled


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