What is the practice being followed for payment of gratuity for employees who have accrued gratuity over 20 Lakhs? Do companies accrue gratuity beyond 20 Lakh?
From India, Delhi
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From India, Delhi
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Dear Ms. Anjali Sharma,
Whether to pay the gratuity beyond Rs. 20 Lakh or not is a decision that the company has to make. If paid, then it will be treated as "ex gratia". Let us consider the following case:
Assume that a person 'A' joins the 'X' company at the age of 20. He serves for 38 years and retires at the age of 58. Upon retiring, his gross salary was Rs. 2,00,000 per month, while his basic salary was Rs. 1,00,000 per month.
Formula to Calculate Gratuity = n * b * 15 / 26
Where:
n = Tenure of service completed in the company
b = Last drawn basic salary + dearness allowance
Therefore, his gratuity = (38 x Rs. 1,00,000 x 15) / 26 = Rs. 21,92,308.
Out of the above amount, Rs. 20,00,000 will be gratuity, and the additional amount of Rs. 1,92,308, if the company decides to pay, will be treated as "ex gratia".
I hope my calculation is correct, and other learned members may suggest corrections if needed.
Thanks,
Dinesh Divekar
From India, Bangalore
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8034Whether to pay the gratuity beyond Rs. 20 Lakh or not is a decision that the company has to make. If paid, then it will be treated as "ex gratia". Let us consider the following case:
Assume that a person 'A' joins the 'X' company at the age of 20. He serves for 38 years and retires at the age of 58. Upon retiring, his gross salary was Rs. 2,00,000 per month, while his basic salary was Rs. 1,00,000 per month.
Formula to Calculate Gratuity = n * b * 15 / 26
Where:
n = Tenure of service completed in the company
b = Last drawn basic salary + dearness allowance
Therefore, his gratuity = (38 x Rs. 1,00,000 x 15) / 26 = Rs. 21,92,308.
Out of the above amount, Rs. 20,00,000 will be gratuity, and the additional amount of Rs. 1,92,308, if the company decides to pay, will be treated as "ex gratia".
I hope my calculation is correct, and other learned members may suggest corrections if needed.
Thanks,
Dinesh Divekar
From India, Bangalore
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Gratuity - Taxation Issues.docx
Payment of Gratuity Act, 1972 & The Rules.ppt