GRATUITY

1. GRATUITY

2. 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

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

4. Family • Himself/ Herself • Spouse • Children (married or unmarried) • Dependent parents • Dependent in-laws • Widow & children of predeceased son • Adopted children

5. 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.

6. 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

7. Calculation • The formula for calculating gratuity is as follows – [(Salary*15)/26]*service period Where, • Salary = Basic + DA

8. 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

9. 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.

10. 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

11. Forms to be filled

12. Forms to be filled

13. Forms to be filled

14. Forms to be filled