Dear Professionals,
Can anyone share what is the Min/Max wage to be considered to cover an employee under the Gratuity Act? What is the Max Gratuity to be paid? As per the act, it says the maximum amount of gratuity payable to an employee shall not exceed 20 months' wages. Is it amended in the Act or still applicable in all Companies?
I read that the max Gratuity is Rs. 3,00,000/-, but I have a doubt about it. Can I seek your insights/experiences on it?
From India, Hyderabad
24Can anyone share what is the Min/Max wage to be considered to cover an employee under the Gratuity Act? What is the Max Gratuity to be paid? As per the act, it says the maximum amount of gratuity payable to an employee shall not exceed 20 months' wages. Is it amended in the Act or still applicable in all Companies?
I read that the max Gratuity is Rs. 3,00,000/-, but I have a doubt about it. Can I seek your insights/experiences on it?
From India, Hyderabad
Hi Kalpna/Raju,
I would like to add something in 10 lakh. Rs. 10 lakh Maximum limit for Gratuity is only for tax calculation purposes. There is nothing in this section that shall affect the ability of any employee to receive better terms of Gratuity under any award, agreement, or contract with the employer.
Purushottam Dass Matta
From India, Alwar
I would like to add something in 10 lakh. Rs. 10 lakh Maximum limit for Gratuity is only for tax calculation purposes. There is nothing in this section that shall affect the ability of any employee to receive better terms of Gratuity under any award, agreement, or contract with the employer.
Purushottam Dass Matta
From India, Alwar
There is no minimum or maximum wage limit for an employee to be eligible for gartuity under the Gratuity Act. B.Saikumar HR & labour law advisor Mumbai
From India, Mumbai
From India, Mumbai
Dear Sai Kumar,
It was nice meeting you at CireHR.
Could you please clarify the maximum gratuity that should be paid to an employee? Is the maximum amount of gratuity not supposed to exceed 20 months' wages?
Can I expect a correct answer to the above query?
Thank you.
From India, Hyderabad
It was nice meeting you at CireHR.
Could you please clarify the maximum gratuity that should be paid to an employee? Is the maximum amount of gratuity not supposed to exceed 20 months' wages?
Can I expect a correct answer to the above query?
Thank you.
From India, Hyderabad
Hi Kalpana,
Sub-sec. (3) of Section (4) stipulates a maximum limit for the gratuity amount to be paid to an eligible employee. Previously, the maximum limit was Rs. 3.5 lakhs. In 2010, this subsection was amended, and the maximum limit has been enhanced to Rs. 10 lakhs. It means if, by applying the gratuity formula, the amount of gratuity payable to an employee works out to Rs. 12 lakhs, he will be paid only 10 lakhs under the Act but not 12 lakhs. Gratuity is payable at the rate of 15 days' wages last drawn for each completed year of service under the Act as follows: Wages for this purpose, in plain terms of the definition of wages under Sec. 2(s), can be Basic + DA.
Basic + DA / 26 x 15 x number of years of service.
The Act does not prescribe any formula for the calculation of gratuity based on the number of months. However, the Act will allow an organization to frame a gratuity scheme with better terms. You must be having your own gratuity scheme with that kind of formula.
B. Saikumar
Mumbai
From India, Mumbai
Sub-sec. (3) of Section (4) stipulates a maximum limit for the gratuity amount to be paid to an eligible employee. Previously, the maximum limit was Rs. 3.5 lakhs. In 2010, this subsection was amended, and the maximum limit has been enhanced to Rs. 10 lakhs. It means if, by applying the gratuity formula, the amount of gratuity payable to an employee works out to Rs. 12 lakhs, he will be paid only 10 lakhs under the Act but not 12 lakhs. Gratuity is payable at the rate of 15 days' wages last drawn for each completed year of service under the Act as follows: Wages for this purpose, in plain terms of the definition of wages under Sec. 2(s), can be Basic + DA.
Basic + DA / 26 x 15 x number of years of service.
The Act does not prescribe any formula for the calculation of gratuity based on the number of months. However, the Act will allow an organization to frame a gratuity scheme with better terms. You must be having your own gratuity scheme with that kind of formula.
B. Saikumar
Mumbai
From India, Mumbai
Dear Sai Kumar,
I am very thankful to you for this. You have clarified my doubt with clear information and sections. I am pursuing a PG Diploma in Labour Laws and Admin Laws. While reading the Act in the university book, I encountered many doubts and found CiteHR to be the best source for obtaining accurate information.
Before inquiring about the syllabus (OLD), I wanted to have my doubts cleared by individuals who are well-versed in speaking as per the Amended Act. Thank you so much for the information.
From India, Hyderabad
I am very thankful to you for this. You have clarified my doubt with clear information and sections. I am pursuing a PG Diploma in Labour Laws and Admin Laws. While reading the Act in the university book, I encountered many doubts and found CiteHR to be the best source for obtaining accurate information.
Before inquiring about the syllabus (OLD), I wanted to have my doubts cleared by individuals who are well-versed in speaking as per the Amended Act. Thank you so much for the information.
From India, Hyderabad
Dear Mr. Sai,
Maybe I am wrong, but there is no such limit for gratuity. Yes, the limit is 10 lakhs, but it's only to calculate income tax. Up to Rs. 10 lakhs is exempted from income tax; after 10 lakhs, it becomes a taxable amount. Please, could other seniors also clarify whether I am mistaken.
Manish Bali
Manager, HR, Jindal Group
From India, Delhi
Maybe I am wrong, but there is no such limit for gratuity. Yes, the limit is 10 lakhs, but it's only to calculate income tax. Up to Rs. 10 lakhs is exempted from income tax; after 10 lakhs, it becomes a taxable amount. Please, could other seniors also clarify whether I am mistaken.
Manish Bali
Manager, HR, Jindal Group
From India, Delhi
Dear Manish,
Sub-Sec. (3) of Sec. 4 of the Payment of Gratuity Act reads as follows:
"The amount of gratuity payable to an employee shall not exceed ten lakh rupees."
There is not a word more or a word less in the sub-section. Thus, there is nothing in this sub-section to suggest that the ten lakh cap is only for income tax exemption purposes and that gratuity can be paid without any limit. However, an organization may frame its own scheme with better terms wherein there may not be such an upper ceiling but limiting income tax exemption up to ten lakhs only. You are probably referring to such a gratuity scheme.
B. Saikumar HR & Labour Law Advisor Mumbai
From India, Mumbai
Sub-Sec. (3) of Sec. 4 of the Payment of Gratuity Act reads as follows:
"The amount of gratuity payable to an employee shall not exceed ten lakh rupees."
There is not a word more or a word less in the sub-section. Thus, there is nothing in this sub-section to suggest that the ten lakh cap is only for income tax exemption purposes and that gratuity can be paid without any limit. However, an organization may frame its own scheme with better terms wherein there may not be such an upper ceiling but limiting income tax exemption up to ten lakhs only. You are probably referring to such a gratuity scheme.
B. Saikumar HR & Labour Law Advisor Mumbai
From India, Mumbai
Say for example, if it exceeds 10 lacs, what is the percentage of income tax to be deducted. pls share
From India, Madras
From India, Madras
Dear All,
The 10 Lakhs limit is, as far as income tax law is concerned. A company can pay more depending on its own gratuity policy. I know a company where gratuity is paid at the rate of 15 days per year for up to 15 years of service, and thereafter at the rate of one month per year. I do not think there is any upper limit.
Have a nice day.
S.K. Deshpande
Kandivali East, Mumbai.
From India, Bangalore
The 10 Lakhs limit is, as far as income tax law is concerned. A company can pay more depending on its own gratuity policy. I know a company where gratuity is paid at the rate of 15 days per year for up to 15 years of service, and thereafter at the rate of one month per year. I do not think there is any upper limit.
Have a nice day.
S.K. Deshpande
Kandivali East, Mumbai.
From India, Bangalore
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