• Paid for faithful continuous service in the organization • Payable on completing 5 years of continuous service with the organization
• The above rule is waived of in the eventuality of
• Death • Permanent disablement • Includes probation period
• Applicable to those organizations where employee strength is more than 10
• • • • • • Himself/ Herself Spouse Children (married or unmarried) Dependent parents Dependent in-laws Widow & children of predeceased son • Adopted children
• Superannuation • Retirement
• Attainment of age for vacating employment • Termination of employment other than superannuation • Earned while on duty or on leave. • Includes DA • Does not include bonus, HRA, overtime, commission etc.
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
• The formula for calculating gratuity is as follows – [(Salary*15)/26]*service period Where, • Salary = Basic + DA
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
• 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.
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
Form A Form B Form C Form D
Forms to be filled
Notice of opening Notice of change Notice of closure Notice of excluding husband from family Withdrawal of the above notice
Concerned authority of the area Concerned authority of the area Concerned authority of the area
30 days of Act becoming applicable 30 days of change 60 days before closure
To be submitted to the employer in triplicate. The employer to submit a copy of the same to the concerned authority of the area. To be submitted to the employer in triplicate. The employer to submit a copy of the same to the concerned authority of the area.
Forms to be filled
FORM DESCRIPTION Form F Nomination SCHEDULE SUBMITTING AUTHORITY To be submitted to the employer in duplicate. The employer to verify & attest the same and return a copy to the employee To be submitted by the employee within 90 days of acquiring a family
Modification of nominee
Application for gratuity
To be submitted to the employer in cases where the nominee predeceases the employee
To be submitted by the employee within 30 days of gratuity being payable.
Application of To be submitted by the nominee to the gratuity by employer within 30 days of gratuity nominee being payable to him. Application in
Forms to be filled FORM DESCRIPTION SCHEDULE
Form K Application of gratuity by legal heir
To be submitted to employer within a year of gratuity being payable
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.
On verification, if the employer finds the claim inadmissible, the employer may issue a notice to the employee/ nominee/ heir specifying the reasons for rejecting the claims. In the above case, if the employer fails to give reasons then the employee/ nominee/ heir can apply within 90 days of submission of Form L to the concerned authority of the area
Notice rejecting payment of gratuity Application for direction
Forms to be filled
FORM Form O DESCRIPTION Notice for appearance before the controlling authority Notice for payment of gratuity SCHEDULE SUBMITTING AUTHORITY On receipt of Form N, the concerned authority may call the applicant and the employer to appear before him on a specified date, time & place. On verifying the claims, the controlling authority issues a notice to the employer to make the payment to the employee within 30 days of the issue of the notice. The employer will prepare an abstract of the Act and display it at a prominent place where all the employees can see the same.
Display of abstract