What is Gratuity
The lump sum amount paid to employees by the employer during their retirement or during their resignation from the company referred to as Gratuity. This is onetime amount which calculated based on your last drawn basic salary during your service.
There are various eligibility criteria and conditions which have met to be eligible to get the amount. The higher the basic salary in your total net salary will get a good figure of amount.
This amount is not based on any contribution made during the service or linked with any existing employee schemes. Gratuity amount will calculate, based on the formula which solely determined on tenure of service along with last drawn basic salary.
Under the Payment of Gratuity act 1972, This may considered as a monetary amount which paid to employees by the employer. This may paid as an appreciation of service they have worked in the company for over a long duration.
This may used as one of the components of the salary which makes your gross salary. The amount of Gratuity in Salary may only released to employees on their proper registration and have completed at least 5 years of term.
How to get Full Gratuity Amount
Employer does use these funds to pay for the employee or does use the Gratuity Insurance plan. The annual premium on behalf of employees paid by the employer and once their eligibility met, the same lump sum amount created into the employee account. Moreover, they fully paid by the employer and there don’t involve any contribution from the employee or any deduction.
Here we bring you a list of points that can bring you a glance about whether the amount received to an employee or not.
- Employee has to be in service for least 5 years
- Employee must be eligible for superannuation
- Employee registration must be legal and smooth
- Employee must have to attain retirement age
- In case, employee has suffered disability or passed away
Gratuity Amount = Number of Years * Last Drawn Basic Salary * (15/26)
Here the Number of years will be your term as an employee in the present company and if you cross over 6 months in a year, then it will be termed as full 1 year in calculation. Last drawn basic salary may check from your Gross Salary
Employees can check their total Gratuity amount which may credited into their account at the time of their final settlement. The final settlement will get you along with all your leftover payments from the organization.
- The rule of taxation on final amount will depend on employees who receive the retirement amount.
- The amount for a government employees is exempt from Income tax
- An eligible private employee covered under Gratuity Act for tax exemption – Refer clc.gov.in
Does contract employee receive Gratuity on completion of 5 years term?
In case, the company has added the contract employee in their list of Gratuity and then they will surely get the amount as per the Gratuity formula once they resign from employment. In case, the company has added the contract employee in their list of Gratuity and then they will surely get the amount as per the Gratuity formula once they resign from employment.
Does Gratuity have any cap on total amount?
The total Gratuity amount that an employer can pay to employee should be up to 1 million only which is irrespective of the years of compilation. Higher than these amounts considered as ex-gratia and it is solely employer interest.
Does the Gratuity amount have a nominee to add?
Yes, the employee can add any of their family members as applicable under Gratuity act as a nominee. In case of sudden accident or any condition, the Gratuity amount transferred to the nominee account.