Gratuity is a lump sum amount given by an employer to their employee as a token of appreciation. Under the Payment of Gratuity Act 1972, an employee is eligible to get the gratuity once they complete their five years of continuous service with a single employer. It is not a part of the regular salary. As per the law, if a company has 10 or more employees, it must give gratuity. In case of death or disability of an employee, the 5-year continuation service condition is not required.
Is gratuity taxable?
Gratuity for government employees is tax-free; however, it is taxable for private employees if the amount is more than Rs 20 lakh.
Can an employer deny gratuity?
No, it is a legal right of an employee.
Add Zee Business as a Preferred Source
In case of an employee’s death, who can get his gratuity?
If an employee dies, they can nominate a family member.
What if an employer pays gratuity later than the due date?
Gratuity must be paid within 30 days of its due date. If employers delay it, an interest must be paid by them.
How to calculate gratuity?
To calculate the gratuity, you can use this formula:
(Last Drawn Salary x Number of Years of Service) X 15/26
Here, 15 refers to 15 days’ wages per year, and 26 refers to 30 days in a month, excluding Sundays.
Partial years calculation is gratuity
If your service period is more than six months, it is rounded up to the next full year.
For example, five years and seven months is considered 6 years for calculation purposes.
What will be your gratuity on a Rs 40,000 basic salary for 8.7 years of service?
Let’s calculate gratuity for an employee with a basic salary of Rs 40,000, 8 years, and 7 months of service (Rounded to 9 years).
Gratuity = (40,000 × 9 × 15)/ ÷ 26
Gratuity = Rs 2,07,692
What will be your gratuity on a Rs 50,000 basic salary for 8.7 years of service?
Let’s calculate gratuity for an employee with a basic salary of Rs 50,000, 8 years, and 7 months of service (Rounded to 9 years).
Gratuity = (50,000 × 9 × 15)/ ÷ 26
Gratuity = Rs 2,59,615
What will be your gratuity on a Rs 60,000 basic salary for 8.7 years of service?
Let’s calculate gratuity for an employee with a basic salary of Rs 60,000, 8 years, and 7 months of service (Rounded to 9 years).
Gratuity = (60,000 × 9 × 15)/ ÷ 26
Gratuity = Rs 3,11,538