Gratuity Rules: The lump sum amount given to an employee on leaving the job or retiring is called gratuity. According to the Gratuity Payment Rule 1972, an employee becomes eligible to receive gratuity after completing five years of service in any company or organization. Generally everyone knows this, but do you know that you can get the benefit of gratuity even before completing 5 years. If you are not leaving the company just because of gratuity, then let us tell you that you can become eligible for gratuity even before completing 5 years.
Gratuity will be given after completing 240 days in a year
Very few people know that in some situations, gratuity can be received even before 5 years. If you have completed 4 years and 240 days in a company or organization, then you may be entitled to gratuity. Therefore, you must calculate your service period before leaving the job. Suppose if your company refuses to give gratuity, then you can file your complaint in the labor department or court.
If you want to get gratuity on leaving the job, then keep in mind that the period of your work in the company should be at least 4 years and 8 months. Only after this you will be eligible for gratuity. That means employees who serve for less than 4 years and 240 days will not get gratuity. Please note that 5 years of service is not necessary in case of death or disability of an employee.
Rules for getting gratuity
If an employee has completed 240 days in the 5th year, then it will be considered as 5 years of complete service and he will be paid gratuity amount.
Can the company refuse to pay gratuity?
The High Court has given different verdicts in such cases. For example, according to Delhi and Madras HC, an employee is entitled to gratuity after completing 4 years and 240 days. At the same time, Karnataka HC says that this rule applies only in certain circumstances, such as illness, accident etc. If the employee resigns voluntarily, he will have to complete 5 years in the company to get gratuity.
How is gratuity calculated?
This formula is used to calculate gratuity (Gratuity Calculation Formula)
(15 x last salary x service period) / 26
For example, if the last salary of an employee is Rs 45,000 and he has worked for 4 years and 290 days in the company, which will be considered equivalent to 5 years. So according to the formula, his gratuity will be Rs 1,29,808.
(15 X 45,000 X 5)/26 = Rs 1,29,808
Maximum tax-free gratuity limit
Gratuity payment is tax-free, but the government has set a limit for it. According to the rules, gratuity up to Rs 20 lakh is tax free. That is, if someone gets more gratuity than this, then the employee will have to pay tax on the amount above Rs 20 lakh.