Purpose:
The act aims to provide a monetary benefit to employees as a gesture of gratitude for long and meritorious service.
Eligibility Criteria:
An employee becomes eligible for gratuity after completing five years of continuous service with the same employer.
For disabled employees or in case of death, the requirement of continuous service is waived.
Calculation of Gratuity:
Gratuity is calculated based on the employee’s last drawn salary and the number of years of service.
The formula is: Gratuity = (Last Drawn Salary × 15/26) × Number of Years of Service.
Payment Events:
Gratuity is payable on retirement, resignation, death, or disability due to an accident or illness.
Nomination:
Employees have the right to nominate a family member who would receive the gratuity in case of the employee’s demise.
Maximum Limit:
The maximum gratuity payable is capped at ₹20 lakhs as of the latest amendment in 2018.
Employer’s Obligations:
Employers are obligated to arrange for the payment of gratuity, maintain records, and display the abstract of the Act.
Tax Implications:
Gratuity received is exempt from income tax up to a certain limit, as specified by the Income Tax Act.
Legal Recourse:
If an employer fails to pay gratuity, an employee has the right to approach the Controlling Authority under the Act for resolution.
Amendments:
The Act has undergone amendments to increase the maximum limit and adapt to changing economic conditions. service.
Eligibility Criteria:
An employee becomes eligible for gratuity after completing five years of continuous service with the same employer.
