Lose Out on Gratuity: Many employees across both private and government sectors remain unaware of gratuity benefits offered after long-term service. Though this financial reward is available under specific conditions, a lack of clarity around eligibility and calculation methods often leaves workers in the dark. Whether you’re planning for retirement or a mid-career transition, understanding how gratuity works could help you make informed decisions about your employment benefits.
Who is Eligible for Gratuity
Gratuity is a monetary reward given to workers who are in the continuous service of an organization for not less than five years. Gratuity can be applied only where ten or more individuals are in employment in a given organization. Gratuity can be used both in private as well as in government organizations as long as there are ESIC facilities available for the organization. A worker leaving before he could reach five years of continuous working in one and the same organization is not granted this facility.
How the Gratuity Amount Is Calculated
The gratuity amount is calculated on the basis of the employee’s final monthly salary at the time of retirement or resignation. The calculation involves 15 days’ salary of the last month divided by 26, and then multiplied by the number of years worked in that company. This calculation gives the total gratuity amount to be paid to the employee.
Tax Benefits on Gratuity
According to the existing provisions, the highest amount of gratuity that can be exempt from tax is up to ₹20 lakh. Any amount above this will be subject to income tax provisions. This gives a major benefit to long-serving employees who can be entitled to huge amounts at the time of retirement or resignation.
Gratuity Can Be Availed as a Loan
Employees completing five years of uninterrupted service also request receiving the gratuity in the form of a loan in case of financial crises. The final release of the gratuity amount is made, though, at the time of retirement or permanent exit from the organization. This facility can serve as a financial safety in extreme circumstances without awaiting final retirement.
Why Gratuity Awareness Matters
Even though gratuity is a legally required benefit, most employees never get the benefit just because they don’t know or miss out on qualifying conditions. Professionals should verify their organization’s policy, ensure service continuity, and keep themselves updated on the eligibility criteria to get their rightful benefits.