Kindly confirm on 5.7 years of continues services staff will eligible for 5 years gratuity or 6 years gratuity
1
The service of more than 5 years and six months would render you eligible for six years gratuity by a combined reading of Sections 4(2) & 2A. As per Section 4(2) gratuity is payable for every completed year of service and for every part in excess of six months. Section 2A defines continuous service of more than 120 days in a period of six months as six months service under the Act. So seven months continuous service will qualify for one additional year of service for calculation of gratuity and accordingly the calculation of gratuity has to be for six years.
From India, Mumbai
From India, Mumbai
Gratuity
Gratuity is a defined benefit plan and an important form of social security employee benefits. It is one of the many retirement benefits offered by the employer to the employee upon leaving his job. Gratuity is a part of salary that is received by an employee from his/her employer in gratitude for the services offered by the employee in the company. An employee may leave his job for various reasons such as retirement, by way of voluntary retirement, resignation or for a better job elsewhere. Every factory or establishment would pay gratuity to its employees if employees are more than 10; according to Payment of Gratuity Act, 1972.
Gratuity is calculated on Basic+DA. It is TAXFREE upto 10 Lakhs.
Eligibility to receive gratuity
An employee will be eligible for receiving gratuity:
Only if he completes 4years 6months 1day when he/she resigns from the company for continuous service with a single employer
When he/she retires from the company
When he/she dies or suffers disability due to illness or accident
Note :
6 months+1 day of a year can be counted as one year.
Examples for consideration of years :
1) 7 years 6 months 1 day = 8 years (considered)
2) 7 years 6 months = 7 years (considered)
3) 7 years 4 months = 7 years (considered)
Calculation of gratuity :
Gratuity = (last payslip’s Basic+DA) * (15/26) * (number of years serviced)
Example :
Consider Basic+DA = 6500
Time period = 6 years 7 months
Calculation :
Gratuity = (Basic+DA) * (15/26) * no. of years serviced
=(6500) * (15/26) * 7
=26,250
Employee can give nomination by filling ”Form F” at the time of joining the company (during new joinee formalities). Employee can nominate one or more members of his/her family to receive the gratuity amount in the event of death of the employee.
To claim the amount of gratuity:
Form I
Application for gratuity.
To be submitted by the employee within 30 days of gratuity being payable.
Form J
Application of gratuity by nominee.
To be submitted by the nominee to the employer within 30 days of gratuity being payable.
Form K
Application of gratuity by legal heir.
To be submitted to the employer within a year of gratuity being payable.
Form L
Notice for payment of gratuity.
On verification of claims, the employer issues a notice to the employee/nominee/legal heir about the amount of gratuity payable within 15 days of the receipt of notice. The payment should be made within 30 days of the receipt of application.
Tax Exemption on Gratuity payment to an employee as per Income Tax Act
For government employees, entire amount of gratuity received on retirement or death is exempted from income tax.
In case of non-government employees, income tax rules on gratuity depend on whether employees are covered under the Payment of Gratuity Act, 1972 or not. For non-government employees covered under the Gratuity Act, the income tax exemption on gratuity received is least of the following:
15 days salary based on the salary last drawn for every completed year of service or part thereof in excess of 6 months. Therefore the amount that shall be exempt from total Gratuity paid is calculated as Last drawn salary(Basic+DA) * 15/26 * years of service.
Maximum amount specified by the government which is currently Rs. 10 lakhs.
Actual gratuity received.
For non-government employees not covered under the Payment of Gratuity Act, the income tax exemption on gratuity received is least of the following:
Half month’s average salary for each completed year of service. While calculating completed years, any fraction of a year shall be ignored.
Maximum amount specified by the government which is currently Rs. 10 lakhs.
Actual gratuity received.
From India, Hyderabad
Gratuity is a defined benefit plan and an important form of social security employee benefits. It is one of the many retirement benefits offered by the employer to the employee upon leaving his job. Gratuity is a part of salary that is received by an employee from his/her employer in gratitude for the services offered by the employee in the company. An employee may leave his job for various reasons such as retirement, by way of voluntary retirement, resignation or for a better job elsewhere. Every factory or establishment would pay gratuity to its employees if employees are more than 10; according to Payment of Gratuity Act, 1972.
Gratuity is calculated on Basic+DA. It is TAXFREE upto 10 Lakhs.
Eligibility to receive gratuity
An employee will be eligible for receiving gratuity:
Only if he completes 4years 6months 1day when he/she resigns from the company for continuous service with a single employer
When he/she retires from the company
When he/she dies or suffers disability due to illness or accident
Note :
6 months+1 day of a year can be counted as one year.
Examples for consideration of years :
1) 7 years 6 months 1 day = 8 years (considered)
2) 7 years 6 months = 7 years (considered)
3) 7 years 4 months = 7 years (considered)
Calculation of gratuity :
Gratuity = (last payslip’s Basic+DA) * (15/26) * (number of years serviced)
Example :
Consider Basic+DA = 6500
Time period = 6 years 7 months
Calculation :
Gratuity = (Basic+DA) * (15/26) * no. of years serviced
=(6500) * (15/26) * 7
=26,250
Employee can give nomination by filling ”Form F” at the time of joining the company (during new joinee formalities). Employee can nominate one or more members of his/her family to receive the gratuity amount in the event of death of the employee.
To claim the amount of gratuity:
Form I
Application for gratuity.
To be submitted by the employee within 30 days of gratuity being payable.
Form J
Application of gratuity by nominee.
To be submitted by the nominee to the employer within 30 days of gratuity being payable.
Form K
Application of gratuity by legal heir.
To be submitted to the employer within a year of gratuity being payable.
Form L
Notice for payment of gratuity.
On verification of claims, the employer issues a notice to the employee/nominee/legal heir about the amount of gratuity payable within 15 days of the receipt of notice. The payment should be made within 30 days of the receipt of application.
Tax Exemption on Gratuity payment to an employee as per Income Tax Act
For government employees, entire amount of gratuity received on retirement or death is exempted from income tax.
In case of non-government employees, income tax rules on gratuity depend on whether employees are covered under the Payment of Gratuity Act, 1972 or not. For non-government employees covered under the Gratuity Act, the income tax exemption on gratuity received is least of the following:
15 days salary based on the salary last drawn for every completed year of service or part thereof in excess of 6 months. Therefore the amount that shall be exempt from total Gratuity paid is calculated as Last drawn salary(Basic+DA) * 15/26 * years of service.
Maximum amount specified by the government which is currently Rs. 10 lakhs.
Actual gratuity received.
For non-government employees not covered under the Payment of Gratuity Act, the income tax exemption on gratuity received is least of the following:
Half month’s average salary for each completed year of service. While calculating completed years, any fraction of a year shall be ignored.
Maximum amount specified by the government which is currently Rs. 10 lakhs.
Actual gratuity received.
From India, Hyderabad
If there is a clause of 120 days consideration for fraction year than even 5.4 years will also eligible for 6 years gratuity not for 5 years and 4.4 years will eligible for 5 years. Plz clarify.
Please note that 4 yrs. 6 months 1 day doesn’t make you qualify for gratuity. One has to put continuous service of minimum 4 yrs and >240 days to qualify for gratuity payment. Suresh
From India, Thane
From India, Thane
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