The general meaning of Gratuity is – ‘a favor or gift, usually in the form of money, given in return for service.’ In employment terms, Gratuity Benefit amount is similar to a bonus, meaning that it is a portion of your salary provided to you, by your employer, for the services rendered on the company’s behalf. Gratuity is a reward for your long and meritorious service.
Gratuity is a defined benefit plan and is one of your retirement benefits offered by your employer. You can generally find Gratuity eligibility details in your CTC (Cost to Company) or Company’s offer letter.
(Meaning of Defined Benefit Scheme is – A plan/scheme in which a certain amount or percentage of money is set aside each year by a company for the benefit of the employee. Gratuity is a defined benefit plan. )
Earlier, it was not compulsory for an employer to reward his employee at the time of his retirement or resignation. But in 1972 the Government passed the Payment of Gratuity Act and made it mandatory for all the employers with more than 10 employees to pay gratuity.
In this post, let us understand about – what is gratuity? How to calculate the gratuity benefit due amount? What is the formula to calculate? Is gratuity amount taxable? What is the applicable tax exemption limit on gratuity benefits? How to calculate the gratuity amount online? What are the income tax implications? …
13 FAQs (Frequently Asked Questions) on Gratuity Benefit Amount
FAQ 1 – Am I eligible to receive Employees Gratuity Benefit Amount?
After completing five years of continuous service with the same company, you are eligible to receive the gratuity benefit. Gratuity shall be payable to ‘you’ (employee) on the termination of your employment after rendering continuous service for not less than five years.
FAQ 2 – When is Gratuity Amount paid?
It is payable..
- On Superannuation (or) Retirement.
- On your Resignation (or) Termination.
- On death or Disablement due to accident or disease.
- On Retrenchment (or) Layoff.
- VRS (Voluntary Retirement Scheme).
(You can check your ‘Full & Final Settlement’ papers to know if you have received the gratuity amount or not.)
FAQ 3 – Is five years continuous service rule applicable to all the above events?
The condition of five years of continuous service is not applicable if employee’s service is terminated due to death or disablement. Your nominee or legal heir can receive your gratuity amount (in the event of death of the employee).
FAQ 4 – Are Temporary staff or Contract workers eligible to receive Gratuity amount?
Temporary staff, contract workers etc., are all eligible (except ‘apprentice’) for the gratuity amount, as long as they are considered as employees of the organization.
FAQ 5 – Is 4 years 10 months (any period above 4.5 years of service) considered as 5 years?
This is one the most frequently asked question and there are various conflicting views available on this one.
In one of the court cases, Madras High Court has held that an employee who has completed 4 years and 240 working days in 5th year will be entitled for gratuity i.e. 4 years 10 months and 11 days.
This judgment may or may not be applicable to you (it depends on the place of your establishment). It is better to contact your HR (Human Resource) personnel to get more clarity regarding this point.
FAQ 6 – How is Gratuity Benefit Amount Calculated? (For the employees who are covered under Gratuity Act)
How to calculate my gratuity amount, is also one the Frequently asked questions. It is calculated based on simple formula as below; (This formula is applicable to all the employees who are covered under the Payment of Gratuity Act, 1972.)
Gratuity = Last drawn salary * 15/26 * No. of completed years of service.
In the above gratuity calculation formula, the definition of ‘last drawn salary’ means, it comprises your Basic Salary + DA (Dearness Allowance if any).
How to treat number of months for the purpose of gratuity calculation after completion of 5 years? Any service which is in excess of 6 months is considered as one year. (Six months and above means even 1 day extra after six months, you are eligible for 1 year gratuity. This is applicable only if you have completed 5 years of service) (Also note that service period calculation is not dependent on ‘5 days or 6 days’ in a week work rule.)
For example – If you have put in 11 years and seven months in an organization, your service period will be taken to be 12 years. But if your service tenure is 11 years and five months, then for the purpose of this calculation your tenure will be taken to be 11 years only.
FAQ 7 – How is Gratuity Benefit Amount Calculated? (For the employees who are not covered under Gratuity Act)
For non-government employees (private company employees), who are not covered under the Gratuity Act, the formula for the calculation of gratuity amount is as below;
Gratuity = Average salary * ½ * No. of years of service
In the above gratuity calculation formula, the definition of ‘Average salary’ means, it comprises, your Basic Salary + DA (Dearness Allowance) + commission (as a percentage of turnover achieved by you, if any). To compute ‘Average Salary,’ you have to consider the average of last 10 months salary (Basic + DA + Commission) preceding the month of your retirement/resignation.
Kindly note that in this case, your service period will not be rounded off to the nearest full year. For instance, if you have a total service of 21 years and 10 months, only 21 years will be considered in the calculation.
FAQ 8 – What is the maximum amount that I can receive as Gratuity Benefit?
Yes, there is a ceiling of Rs 10 Lakh as the maximum gratuity amount that you can receive. As per the above calculations, if you are eligible to get more than Rs 10 Lakh as gratuity, your company is bound to pay only Rs 10 Lakh. (In case your company wants to pay more than 10 L then they can pay it as performance bonus or ex Gratia 🙂)
The ceiling of Rs. 10 lakh applies to the aggregate of gratuity received from one or more employers in the same or different years .
Latest update : The 7th CPC (Central Pay Commission) increased Gratuity Ceiling limit from Rs 10 Lakh to Rs 20 Lakh w.e.f 01-Jan-2016.
Latest News (25-02-2017) : The Central Govt has agreed to raise the ceiling limit of Gratuity amount for Private Sector (organized) employees also, from Rs 10 Lakh to Rs 20 Lakh. The Union Labor Ministry is expected to bring a formal amendment to the Payment of Gratuity Act to implement the change.
FAQ 9 – How to calculate my Gratuity Benefit amount online?
If you are not comfortable in calculating your gratuity due amount using the above formulas, there are lot of online gratuity calculators that are available. You may consider using the below ones;
FAQ 10 – Is Nomination facility available?
Yes, you can give your nomination by filling Form “F” at the time of joining your company (during new joinee formalities). Employee can nominate one or more members of his/her family to receive the gratuity amount in the event of the death of the employee.
FAQ 11 – My company is not paying gratuity due to financial Loss, can it refuse to pay?
Even if your company is not doing financially well, your company is bound to pay gratuity amount. They cannot cite their ‘financial losses’ as the reason for the refusal.
But, an employer can refuse to pay the gratuity amount, if the services of an employee have been terminated for his/her riotous or disorderly conduct or any other act of violence on his part, during his/her employment. Employers can also deduct the cost of damages (if any) from the gratuity amount.
FAQ 12 – Is my Gratuity Amount Taxable in India? Does Employees Gratuity Benefit has any tax exemption?
Gratuity is considered as your retirement benefit and is tax exempted subject to certain conditions of Income Tax Act. For the intent of taxation on gratuity, employees are divided into two categories:
- Government Employees &
- Private Sector Employees
Any gratuity amount received by an employee (Govt or Private employee) during his service is taxable. But when gratuity is received by the employee at the time of his retirement, death or superannuation then tax exemption rules for government employees differs from private employees.
In case of Government Employees the entire gratuity amount that he/she receives on retirement or on death is exempted from paying any Income tax.
In case of Private employees, they are divided as:
- Private employees covered under the payment of Gratuity Act of 1972.
- Private employees not covered under the payment of Gratuity Act of 1972.
In case, when private employees covered under the payment of Gratuity Act of 1972, any gratuity received is tax exempted to the extent of least of the following:
- Statutory limit of Rs 10 lakh. (Maximum limit / Govt notified amount)
- Last drawn salary * 15/26 * No. of completed years of service.(Refer FAQ 6 )
- Actual Gratuity received by you.
If the gratuity exceeds the limit mentioned above, then it becomes taxable.
Example: Let us understand the above tax exemption rule with an example. Mr Sundaram receives Rs 9 Lakh as gratuity benefit from his employer. As per the Gratuity Act calculation, he is eligible to receive, let’s say Rs 5.5 Lakh. The maximum notified limit is Rs 10 Lakh. Out of these, Rs 5.5 Lakh is the least one. So, the tax exemption is limited to the extent of Rs 5.5 Lakh only. Mr Sundaram has to pay income tax on Rs 3.5 Lakh (Actual gratuity received – Tax exempted gratuity amount.)
For private employees not covered under the payment of Gratuity Act of 1972, any gratuity received is tax exempted to the extent least of the following:
- Statutory limit of Rs.10 lakhs.
- Gratuity = Average salary x ½ x No. of years of service. (Refer FAQ 7)
- Actual gratuity received by you.
(Where the gratuity was received in any one or more earlier previous years also and any exemption was allowed for the same, then the exemption to be allowed during the year gets reduced to the extent of exemption already allowed, the overall limit being Rs. 10 Lakh.)
FAQ 13 – Gratuity received by Employee/nominee/legal heir : Taxable under what ‘head’ of income tax?
Gratuity received by you on your retirement (or) during your service period is taxable under the head “Salary.” It should be shown under the head of “Salaries” while computing your ITR. This is applicable for both Government as well as Private employees.
Whereas, gratuity received by the legal heir (or) nominee is not taxable if the gratuity becomes due/sanctioned after the death of the employee. If the gratuity amount becomes due and paid before the death of the employee then it is taxable under the head ‘Income from Other Sources.’ The nominee / legal heir has to show it in ITR (Income Tax Returns).
So, gratuity benefit amount is not fully exempted from income tax. Be extra cautious while calculating the tax exemption limit that is applicable on your gratuity amount. Do check if you have to pay taxes when you receive your gratuity. Kindly share your comments.
( Image courtesy of Stuart Miles at FreeDigitalPhotos.net)
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Hi Sir,
Iwas a permnent staff of a private sector institute. I was on medical leave from 15th April 2015 to 14th November 2016.
And terminated by the employer on 15th November 2016 as I had not joined.
I just want to know my gratuity will be calculated as what my salary was in April 2015 or salary as on November 2016?
Dear Raajan..Was it an approved leave? Were you on pay-roll during this period?
Dear Sir ,
All my leaves were approved by the Principal and on April 2015 I was on pay roll of sixth pay salary basis but on November 2016 seventh pay was implemented.
Regards
Raajan
Dear Raajan ..If you are on pay roll for minimum 5 years then you are eligible for Gratuity. Kindly check with your employer too.
Dear Sir
The Employer giving me gratuity but I want to know on which scale my gratuity will be calculated? On the salary what I had drawn in April 2015 or the salary as on Nov. 2016.
Is there any rule regarding this please send details.
Regards
Raajan
Hi
i Have resigned after 3 yrs of Service in the PVT company.Company is still wants to pay me Rs.75618 as a gratuity but says that the amount is taxable as the tenure of service is less that 5 yrs. So is it ok and if yes then how much tax they would deduct at source.
Dear Mandar ..The tax rate would be as per your income tax slab rate..
I have query regarding income tax norms on gratuity, In the case, when we receive gratuity on below 5 years of service in pvt company. (4 years & 240 days norms)
I worked for a IT company around 4.10 years,then I switch to other company. Now, as part of FFS with previous company , I got my gratuity amount as per gratuity norms.(4 years & 240 days.)
Here, Company deducted income tax on credited gratuity amount and they told me that” I have served below five year ,hence Gratuity amount is taxable”.
Is gratuity amount taxable in above case ? It not then please let me know “what shall i do “?
Regards
Thanks
Dear Raj ..Kindly go through FAQ 5 in the above article.
I believe that it can be treated as gratuity amount in your case and the tax rules remain the same.
sir
I resigned after working in a private organisation in september 2016. As per the formulae my gratuity works out to be approx 22 lacs. I have a question, what will be the gratuity paid to me under the act.
Is there any binding that i have to be paid only 10 lacs ( Maximum) as Gratuity, in case so can u pls mention the rule
regrds
amarjeet singh
sir
i worked for 32 years in the organisation,
reg
amarjeet singh
I have left my organisation in July 2015 and I worked dere for 7 year.
Can I get my gratuity now and if my basic salary was 9000 den what amount should I get?
Dear Sonika ..Kindly check with your employer.
Note that it is mandatory for all the employers with more than 10 employees to pay gratuity.
respected sir
i hv job in furnace 14 year
i m eligible for gratuity or service ?
if yes plz. telling me gratuity & service formula
Dear parmod .. Kindly note that it is mandatory for all the employers with more than 10 employees to pay Gratuity benefit amount, after rendering continuous service for not less than five years.
Dear Sir,
I have a query regarding Income tax exemption on revised gratuity. If the limit is increased to 20 lakh wef Jan 01,2016 , how should a retiree of say Dec 2016 who got the benefit of revised gratuity (18 lakh) and whose tax was deducted as per existing gratuity exemption (10 lakh) claim tax benefit for the same?
Dear Maitreyee ..May have to rectify/revise the ITR. Kindly take advice from a CA.
Also, the notification regarding amendment is yet to be released.
If I show the gratuity under Salary then where on the tax return do I show the exemption so that it does not automatically calculate tax on that?
Dear cvan ..You can declare that amount under ‘Exempt income’ section of ITR.
Hi,
Can the company pay less amount than the actual gratuity amount. I have completed 8 years and 3 months, with last basic as 15000 and we do not have DA part of our salary, hence as per the calculation gratuity amount is coming around 69,000 but the company is paying 38,000. How come company pay less?
Dear Shilpi ..Kindly check with your employer…(Check if they have deducted taxes?)
But Taxes cannot be deducted for amount less than 10 Lacs as per my understanding.
Hello Sir,
I had joined the company on April 2012 the employee strength was more than 10. Now i completed 5 years of service in the same company but the number of employees are now just 4. Do i ask for gratuity if i plan to leave.
Your early response will be appreciated. Thank you.
Dear Yuvraj,
Once Act applies, it continues to apply even if employment strength falls below 10. So, kindly check with your employer.
Thanks You.
Dear Reddy
I have been working in ministry of Defence since 2005.
I have completed 11 years of permanent service in central government.
If i resign , then will i receive gratuity ?
plz clarify
regards
Dear Ranit ..You are eligible to get Gratuity. Kindly check with your employer as well.
Hi ,
My Father Retired from SAIL on 16 july 2016.Does he is eligible for increased gratutity Benefit(10lakh to 20 lakh)
Dear Taran.. I believe he is eligible, but govt notification is yet to be released.
When the amendment for increasing the limit upto ₹20/- lakhs. is expected. Further the formula of 26 days per year is modified.
Dear Mr Ghaisas ..Kindly share the link/source confirming the change of calculation (26 days).
Hi , I have worked form 01/07/2012 to 21/03/2017 , Am I eligible for gratuity ? I have not taken any paid time off.
Dear Rahul..If you have completed 5 years of service, you are eligible to get Gratuity amount.
In one of the court cases, Madras High Court has held that an employee who has completed 4 years and 240 working days in 5th year will be entitled for gratuity i.e. 4 years 10 months and 11 days.
This judgment may or may not be applicable to you (it depends on the place of your establishment). It is better to contact your HR (Human Resource) personnel to get more clarity regarding this point.
Dear Sir,
Myself Jigish Shah, I left my job on 20th Sept.-2016. My joining date was 18th Jan.-2010. My gratuity payment is under process. Can I eligible for 26 days calculation or 15 days ?
Dear Jigish ..I am not sure if there is any notification regarding revision of num of days to 26 days..
dear sir
my father has died in his service
recently my father is an telangan state employee in gandhi hsptil
i want to know how much money i will get
my father service is 26.yrs
last pay was 40955
so kindly provide the answer
my father has taken loans
Hi..Kindly contact the employer and get the details.
HI, Sir I was worked in my previous company for a 4years 11 months(From 1-12-2007 to 15-11-2012) and resigned my job. i want to know that is am i eligible for gatuty and is there any possibilities to avail gratuty.
Dear ASHA,
Some companies do offer Gratuity to employees who have completed 4 years and 10 months service period. So, kindly check with your ex-employer. Also, check your Final settlement document, in case they had already paid it to you.
I am a Software Professional i have complete 4 yr 10 months and 21 days .my company give me gratuity but they are saying its taxable because i have not completed 5 year.
so its true that gratuity is taxable if not completed 5 year?
please hep me on this…
Dear shishir,
I believe that the very fact that your employer is offering you Gratuity, is itself a proof that they have considered your total service period as 5 years.
So, kindly refer to FAQ12 in the above article.
Yes, they are offering but still they saying is taxable because you. Not Completed five years.
Any documents for income tax department to show them as this is non taxable
They are not telling how they know and from where they got this information.
Dear Shishir,
You can find references of Supreme Court & some High court judgments on this topic, click here to go through them..
Quora Post..
Hi I have left company on 31 st Jan 2017,
My gratuity is still not being paid and and I expect it to be paid in next 10 days,it is close to 20 lacs.is it better to ask my company to pay the gratuity amount next month so that I get new rule benefit for tax after it is passed in Parliament.
Dear Naudy,
As of now the amendment is yet to be passed in the parliament and I am not sure by when this will be notified.
can you give clarity about payment of gratuity act section 2A ABOUT CONTINUOUS SERVICE
Dear Dorababu..May I know what exactly you would like to know.
Click here to know abt Section 2A.
In your google account you have mentioned that Private-sector employees will soon be able to withdraw up to Rs 20 lakh in tax-free gratuity.In this connection whether amount uo to Rs. 20 lakhs received by Reserve Bank Of India employees as retirement gratuity is fully exempt up to Rs. 20 lakh? There is no mention of this increased amount up to Rs.20 lakhs in section 10(10) of the Income Tax Act, 1961.Whether Government has issued any notification like earlier notification No.43/2010 (F.No.200/33/2009-IT(A-I)/S.O. 1414(E) dt 11.6.2010
Dear Shailesh ..The Govt is yet to notify this and yet to amend the Gratuity payment Act & IT act. May happen soon.
There are certain doubts which I have about gratuity. Can you please mail me your contact details on my mail id diptiparekh.19**@gmail.com or please provide me your email id
Dear Dipti,
Kindly reach me through Contact page.
Dear Shrikanth, Regarding the latest update the limit is raised to 20 lakh and I heard that the calculations is also revised to 26 days as compared to 15 days. Kindly confirm please. Thanks Rajaraman
Dear Rajaraman,
I believe that the Trade Unions have raised three main demands;
1 – Increase of limit to Rs 20 Lakh.
2 – The calculation for gratuity payment should increase from 15 days to 30 days, and
3 – The gratuity should be given to workers who have completed three years of continuous service instead of five years at present.
I am not sure if the Govt has agreed for 2nd and 3rd point. Let’s wait for few more days to get clarity.
Sir, Are State Government employees(Puducherry U.T) embracing CPF eligible to get Death Gratuity….Administrators here say that Employees benefitting CPF are not eligible for death gratuity,,,Pls Clarify
Dear Pravin,
After completing five years of continuous service with the same company, an employee is eligible to receive the gratuity benefit as per the Gratuity Payment act.
So, kindly check with your employer (HR dept) again.
Hi, i am working in a private sector, my question is we donot have DA but have allowances.. can you please help how it will be calculated in such cases
Thanks Mallik
Dear Mallik,
In that case, only Basic salary alone can be considered..
Hi, In case employee has not completed 5 year of continuous service then he is not eligible to get gratuity? If yes, what company will do for the amount that is kept aside. Whether their is any option on the part of employee to say that I don’t want to a part of gratuity and pay the same to me now as a salary?
Dear Aakash,
Yes, 5 years is minimum service period to get Gratuity benefit.
Even if employee opts out of Gratuity, the benefit amount has to be deposited by the employer with Appellate Authority under Payment of Gratuity Act.
Hi Sreekanth,
I have completed 6 years in a private firm and received a gratuity amount after my resignation. But they have not deducted any Tax for that amount. Now I am working with another company and I have to declare my earnings and Tax deducted from previous employer. Please let me know whether I need to pay tax for the gratuity I received from previous employer. Or should I consider only the total salary I received as my total earning from previous employer and pay tax accordingly?.
How to know a Private employees is covered under the payment of Gratuity Act of 1972?.
Regards,
Matt
Dear Matt,
Kindly check with your Employer if the organization is covered under Gratuity Act or not.
In case, when private employees covered under the payment of Gratuity Act of 1972, any gratuity received is tax exempted to the extent of least of the following:
Statutory limit of Rs 10 lakh. (Maximum limit / Govt notified amount)
Last drawn salary * 15/26 * No. of completed years of service.(Refer FAQ 6 )
Actual Gratuity received by you.
If the gratuity exceeds the limit mentioned above, then it becomes taxable.
You can inform about the gratuity payment to your new employer. In case, they do not consider it in their TDS projections, you have to include it when filing your ITR and calculate taxes accordingly.
is teachers working in private schools are eligible for gratuty
Dear shiva ..
Yes.
Payment of gratuity is mandatory if no of employees are more than 10.
After completing five years of continuous service with the same company, you are eligible to receive the gratuity benefit. Gratuity shall be payable to ‘you’ (employee) on the termination of your employment after rendering continuous service for not less than five years.
I Had worked in a MNC company for 29 years. As per gratuity act, employer should pay me Re. 580690 but he exempted 558356 & made taxable amount 22334. Please clarify.
Dear Sanjay Ji ..Kindly check with your employer and also refer to the points mentioned in the above article.
Kindly note that any service which is in excess of 6 months is considered as one year.
Dear Srikant,
I would like to know about withdrawal of Gratuity wherein an employee resigned from DVC ( Joint venture of GoI, Govt. of Jharkhand and WB,Established under Act of 1948) and joining to PSU after serving 14 yrs. Interview was attended after obtaining the NOC. In the relieving order it is mentioned that the EL, PF,Gratuity will be transferred to new organisation. In the resignation letter it was requested to transfer leave, CPF, gratuity. However I wanted to withdraw gratuity now. Is it possible to withdraw the gratuity amount now ? pl advise.
Regards,
J KUMAR
Dear JAGRUP..If the employer is different, I believe that you can withdraw the Gratuity amount, kindly check with your current employer.
What is the maximum amount of gratuity payable in PSU banks as on date ?
Is it Rs. 10.00 lakhs or Rs. 20.00 lakhs?
Any other update on this.
Please reply on e-mail address also.
Vipin
Dear Vipin,
Though the limit has been increased, the amendment has not yet been notified I guess.
For gratuity, last month salary is considered as what? Is it the salary that one receive before giving resignation or it is full and final settlement amount?
Dear Ajith..Your last drawn monthly salary.
I joined company on 1st July 2012 and will be retiring on 19th Nov 2016.
Just wanted to confirm if I will be eligible for gratuity payment and if yes how will it be calculated
Dear Sunil..If your service tenure is less than 5 years then you may not be eligible to receive the Gratuity benefit.
Hi Sir,
I’m employed by a private firm and have resigned to move to a different company. My last day in the current company is Nov 4th. However, after resigning, during the last hike cycle, I’ve received a hike. This hike is affective from Nov 1st onwards but effectively I will not be withdrawing the hiked salary for one complete month [Only for the 4 days, I’ll be getting the new salary effective Nov 1st]. In this case, will my gratuity be calculated based on the previous salary or the latest after hike salary? I’m a little confused on this. Please let me know.
Thanks
Sumanth Srinath
Dear Sumanth..I believe that it will be calculated based on your last drawn salary ie before the hike.
Dear Sir,
I Joined My company dated 27.02.2012 Nd Company terminate me due to relocation issue dated 31.07.2016.. Can I eligible for Gratuity .
Please tell me.
Regards
Sudip Nigam
Dear Sudip…If your service tenure is less than 5 years then you may not be eligible to receive the Gratuity benefit.
Hi..I work in a joint venture company. .I have completed 4 years but now the company is shutting due to joint venture problems. .will we be getting the gratuity amount since we have been paying from our salaries & we have not resigned ourselves it’s the company’s closure
Hi..Paying from your salary? Are you referring to EPF?
Kindly note that Gratuity is payable to the employees during layoff to those who have completed min 5 years of service. The company may also pay Retrenchment compensation.
Dear Sreekanth,
If there is case where the company is shutting down our group and is asking the employees to resign in return of some ex-gratia amount, is that ex-gratia amount taxable? If it’s not taxable, up to what limit? Is there any particular section under the latest followed IT act which can be followed for justifying the tax or no-tax?
Thanks,
Pratap
Dear Pratap,
I believe that Ex-Gratia amount received from employer is taxable under the head ‘income from salary’.
Dear Sir,
One of our employee has completed 32 years of service, he is eligible for gratuity for how many years? What is the maximum service limit?
Dear Navin ..I believe that it is 33 years of service (remember reading this somewhere, in case of Govt employees).
D/s
with reference this letter i complieted 5 years one Co. in that regard i taken 2 months leave due to medical problems after i taken treatment i continve service in that regard in case i regin shall i getting gratuity or not
Dear BA…I believe that you are eligible to get Gratuity payment.
Dear Sreekanth,
Lets say a private company make provision for gratuity for its employees:
1) Does the gratuity amount must be deposited to a designated fund? Or making a provision is good enough without depositing it to fund manager?
2) Is the any provision pertaining to deposit of gratuity in the Income Tax Act besides the Payment of Gratuity Act 1972? Or the gratuity is govern by Gratuity Act 1972 only?
Dear Mahendra ..I do not have answers to your questions. Kindly consult an HR expert or a CA.
My date of joining in an organization is 2011-Aug, where as date of absorption is 2112-Aug. whether 5 years of service for giving gratuity will be calculated from my date of joining (or) date of absorption. Pls. clarity.
Dear DS,
What is Date of absorption?
You may kindly check about your eligibility with your employer as well..
Is maximum gratuity limit of Rs.20 lacs applicable to co-op bank employees?
Dear karmali ..I dont think so..
Thanks Sir, Hope coming session will amend the Act to make it applicable to all and remove the anomaly and discrimination.
Yes,but only after amendment in gratuity act by parliament.
i am going to retire by date 31.10.2016 .so plz tell me how much tax will get on my gratuity.
basic salary – 51135
and DA – 63919
Lenth of serve – 31 years
Dear KALAMBE Ji ..Kindly use the calculation formulas given in the article.
i am going to retire by date 31.10.2016 .so plz tell me how much tax will get on my gratuity.
basic salary – 51135
and DA – 63919
my employer is deducting 10 percent from my gratuity .. can they do like that ?
Dear Sam..TDS can be deducted if the gratuity amount exceeds the exemption amount as calculated under section 10, otherwise not applicable.
Also, make sure that this TDS gets reflected on Form 26AS.
if a person joins private firm, after the age of 60 and serves the organisation for five years continuously as an employee, Is he eligible for gratuity?
Dear Poonam..Yes and if the organization has more than 10 employees.
if i work in a organisation for 45 years but organisation paid for 40 years is it correct
Hi Sreekanth, Please Advise me How my gratuity will be calculated (private service) my last working day is on 30th of june, 2016.my total service is 32 years & 6 months. my employer pay gratuity only ten lac. am i eligible for actual calculate gratuity amount?
Thanks & regards
jaipal kandav
m. no. 9910491739
Sir , the tax liability is 48 thousand , not 48lacs as indicated , also whether Advance tax would be applicable on the case ,pl clarify
thanks
Dear Tony,
As your gratuity amount is already settled, I am not very sure if new amendment is applicable in your case.
Suggest you to kindly consult a CA.
Sir , My DOB 17/1/1955 retired on 30/4/2015, after 30years as per company policy , private sector , which covered under gratuity rules /act 1972. my gratuity is paid on 4 may 2015. as per formula , no dispute. = Gross Rs 16lacs ,less 10lacs u/s 10(10) no tax , balance 6lacs taxed applying srcitizen slab rate .. =X, which is reflecting in 26AS tds =y YET TO FILE MY RETURNS FOR AY2016-17, FY2015-16. ON evaluation, i end up in tax liability to pay of Z- y , = 48lacs can this is liability be avoided by shelter of new Cabinet approval and Gazatte Notification also have come inn the last week of July 2016 for 20lacs amended increasing the ceiling to 20 lakhs. , and thereby file and claim refund , or pay in full and claim refund or show 20lacs as tax free . it may be noted after this my income is below 3lacs , Sir, would appreciate your suggestion, and reply urgent ,
My company didnt responded to my requests of gratuity and didnt attended labour court proceeding. Now at time of ex-parte they submitted a prayer that we are not doing well and will make the payment after March 2017 and that too in installments.
Where can I find legal info for Faq-11 so that it can be quoted in court ?
Dear Kaps …Kindly go through the Gratuity Act, click here , can be useful to you.
Section 10 AA of Income Tax Act i.e regarding income from Leave Encashment…… For Government Employees There is no limit whereas for non-government employees maximum exemption is Rs.3 lakhs. Why this disparity and discrimination against Non-government employees. How it is justified when all are equal before Law?
Issues pointed out by Mr. V R K RAJU are valid and needs consideration by Supreme Court as all employees are equal in the eyes of law. Why there should be discrimination in the matter of tax treatment between Government employees and other employees. Also why Gratuity Act is not ammended when ceiling on Gratuity for Central Government employees is announced and CCS rules altered.
I would also request Mr. Sreekanth to raise this issue at appropriate Platform for the benefit of all.
In 6th pay commission, there was undue delay in accepting the recommendations and also in passing the amendment to Gratuity act ( delayed by 2 years each .. total 4 years). People who retired during this said 4 years, pleaded for effective date with retrospective effect i.e from 1.1.2006. However the then Labour Minister Mr,Mallikharjun Kharge while passing the amendment to gratuity Act on 24.5.2010, turned down the request of millions of retirees and made the effective date as 24.5.2010 only and not 1.1.2006. All those who retired during that 4 year period even the Central Government employees could not get the arrears of gratuity increase from 3.5 lakhs to 10 lakhs.
Now the Government itself announced the effective date for increased gratuity as 1.1.2016. This they announced during November 2015 itself. But even after 10 months they have not passed the amendment to Gratuity Act. Without passing the amendment to Gratuity Act, in my opinion, they are not supposed to pay the arrears even to Central Government employees. Now Parliament is not in session.
Millions of employees of PSUs or even private sector employees are in utter confusion
All psus employees should insist their trade unions, associations to raise this issue of ₹ 20/- lakhs with ministry of labour & ministry of law for issuing necessary gazzetts. Now the new commission is deputed by Govt. Of India for pay revision of psus.
I HAVE RETIRED FROM A PSU ON 31/5/16.KINDLY CLARIFY WHETHER I AM ELIGIBLE FOR THE REVISED GRATUITY LIMIT OF 20 LAKHS AS PER 7TH CPC. ALSO PLEASE CLARIFY WHETHER THE PAYMENT OF GRATUITY ACT WILL BE AMENDED BEFORE RELEASE OF REVISED GRATUITY LIMIT
For 6th pay commission cabinet approval and Gazette notification came in 2008. Gratuity Act was amended in 2010 and the effective date for increased Gratuity was w.e.f 24.5.2010 (the date on which amendment to gratuity was made in Parliament).
Now Government increased the gratuity ceiling to 10 lakhs. Not only that, the government announced the effective date as 1.1.2016. Cabinet approval and Gazatte Notification also have come inn the last week of July 2016. To my knowledge Gratuity Act is not yet amended increasing the ceiling to 20 lakhs. In such a scenario, can the Public Sector Banks (in which gratuity is payable as per Gratuity Act) implement the effective date as 1.1.2016?
Earlier when gratuity increased to 10 lakhs, the government made 24.5.2010 as effective date and millions have lost the benefit. why government is playing this trick. why cant they pass the amendment during monsoon session itself. who has to be blamed for these delays?
Dear V R K RAJU ..You have shared a very valid point. Even I tried to check if the amendment has been passed or not but could not get correct information.
I am going to retire on 31st August 16 from CIL ( A PSU ). whether I will get enhanced Gratuity….
Yes, dear Arun Ji..Kindly check with your employer too.
When the Gazzet notification for increased limit to ₹ 20 lakhs for gratuity will come into force. Where PSUs employees can get the benifit of ehanced limit of 20 lakhs ?
Please confirm.
The gratuity for both central govt employees as well as PSU are goverened by payment of gratuity act. Hence the act requires amendment before releasing enhanced gratuity
I have worked 8 years in a private company, but there were 8 employees. before 2-3 years 2 more employees were joined and they left in 9 months. So am I eligible for the gratuity? Shall I consider the director of the company as an employee?
Dear Nandha,
Once number of employee reaches 10 or more (even if the number comes down later) company is liable to pay gratuity from date of joining of employee. So, kindly check with your employer.
Sir,
Now the gratuity ceiling increased to 20 lakh. Is it applicable for private employees also or it is applicable only to Govt. employees only ? Thanks.
Dear Karnna..I believe that it is applicable only to Govt sector employees.
Dear Sreekanth Sir,
Thank you for detailed explanation of this topic. I heard that as per 7th pay recommendation ceiling of 10 lakh will be increased to 20 lakh.
Also does formula LDP*15/25*Number of service year applicable for all government employee ( including Madhya Pradesh govt).
Thanks
Ashish Shrivastava
Dear Ashish,
Yes, the gratuity benefit amount has been doubled for govt employees as per the 7th pay commission.
I believe that the formal is same .
Sir please help me….
My father was teacher in kendriya vidyalya tgt. And his
Band pay : 17810?
Grade pay : 4600
Da:28012
Year of service 21 year 6 month.
But on 27 may 2016 my father got death due to accident.
And we have final recieve gratuity amount 10 lakh…so sir i just want yo confirm that after seven pay commision is considered what really amount we deserve?
Dear Prashant ..I am not sure about this one. Apologies. Kindly contact the employer.
Dear Sir,
I retired from the services in Nov 2015. But due to some reason my retirement benefits were actually paid to me by the employer, in Feb 2016. Can I seek IT benefit on the increased exemption limit ?
Further, Is there any possibility to seek gratuity as per the revised limits, even though retired in Nov, but benefits of gratuity were paid in Feb 2016 ?
R Kamat
Dear Mr Kamat..You can claim tax relief on arrears received. Suggest you to take help of a CA.
one of my friends had got gratutity but Tax was deducted by the employer. what is the process to claim refund(should I simply deduct this from amount from Income under the head salaries)
Dear mohit,
If it is an exempt amount, include TDS in tax paid and verification section and also report the exempt income under EI schedule or row.
sir, good evening
I got retirement on 31.03 2016 from a psu and my gratuity was given during april and may 2016 however tax was deducted and deposited with govt under current year tax liability (2015-16). Please clerify the following points:
1. When the tax on gratuity is due as I got retired on 31st March-the last day of the financial year.
2. I was given the gratuity amount during april, may 2016, can my employer deduct the tax for the current year.
3. My employer has deposited the tax with the Govt., can I claim the refund if the tax was not due this year.
thanks
with regards
Dear subhash,
If the TDS has been already deducted in FY 2015-16 itself and the same is reflected in your Form 26AS, you can claim REFUND (if any) when filing ITR for AY 2016-17.
sir,
thanks a lot however still there are issues to resolve.
I conclude the following points on the basis of your answer:
1. my gratuity is due not on 31 st march 2016 but after 31st march as that was my last working day. is it?
2. tax on gratuity is payable during 2016-17 and not 2015-16. am I right?
3. My employer has also taken into account the amount of gratuity in form 16. In such situation how can I file my return with the different amount of salary .
3. some part of tax on gratuity is paid by employer also and hence how can I reach the exact amount of refund. Will it be illegal if total refund amount is paid to me.
please show light in details. thanks again
with regards
subhash
Dear subhash ..Suggest you to consult a CA and take help regarding this matter.
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Hi,
I had worked for my previous organisation for 5+ years and received a gratuity of Rs 70052 Is the Gratuity paid to me exempted from Tax? If No, under which category i have to show while filling ITR.
Regards,
Neha
Dear neha,
Kindly go through the points given in the article.
For private employees not covered under the payment of Gratuity Act of 1972, any gratuity received is tax exempted to the extent least of the following:
Statutory limit of Rs.10 lakhs.
Gratuity = Average salary x ½ x No. of years of service. (Refer FAQ 7)
Actual gratuity received by you.
If it is exempted, then you can report this income as ‘exempt income’ in EI schedule of the ITR.
Hello,
I have retired from LIC on 31 March 2016. My basic salary was 69000 and DA was 24000.
On my retirement I got the gratuity amount as per the old gratuity ceiling of 10 Lakh rupees. I wanted to check whether now I will be getting the arrears for the gratuity amount as the ceiling has been revised to 20 Lakh rupees in 7th pay commission.
Dear Rishabh Ji,
The 7th Pay Commission report will be effective from January 1, 2016. So, you may get the arrears. Kindly check with your employer too.
Thanks a lot Sreekanth Ji 🙂
i am a major ports servant will retire on 31/07/16 on vrs . shall i get 10 lakh or 20 lakh as gratuity. pl send the answer.
Dear gvrao..The actual gratuity amount that you get depends on your salary. The above point is for calculation of exemption only.
MY SALARY (BASIC + DA ) = Rs.72761 MY SERVICE IS 38 YEARS 6 MONTHS 25 DAYS HOW MUCH AMOUNT I GET AS GRATUITY I AM GOING TO RETIRE 31/08/2016 , MY EMPLOYER IS MAJOR PORT TRUST.
Dear gvrao ..Kindly go through the article.
I am filing itr. I have gratuity and leave encashment mentioned in form 16. I am sure till the part that it would be non taxable income, this is also mentioned in the form 16.
My query is about reporting it, should I report it in ITR1 itself or in ITR2?
I think it can be reported in ITR1 itself, however when I goI am sure till the part that it would be non taxable income, this is also mentioned in the form 16.
My query is about reporting it, should I report it in ITR1 itself or in ITR2?
I read the above thread provided by Amit Gupta, on the basis of that I think it can be reported in ITR1 itself, however when I go through blogs and some websites, mostly ITR2 is mentioned for such cases.
Could anyone throw light on this? through blogs and some websites, mostly ITR2 is mentioned for such cases.
Could you throw light on this?
Thanking you in advance.
Dear Abhijit,
I agree with you that the opinions are divided.
Most of the CAs do suggest to report any exempt income (if more than Rs 5000) by filing ITR 2 or ITR 2A.
But some do suggest that as this is just for reporting purposes, so one can file ITR 1.
I had worked for my prevoius organisation for 4 years 11 months and received a grauity of Rs1,56,897 and it has been taxed under “Head salaries”. As per the Income Tax rules, Grauity up to 10lakhs is exempted. Is the Grauity paid to me exempted from Tax? If so how do i claim TDS refund while filing returns?
Dear Amit,
Kindly note that the condition says WHICHEVER IS LEAST..So, kindly calculate the exempt amount as per the points provided in the article. In case if you have claim TDS then show the TDS amount in ‘taxes paid & verification’ section and can claim REFUND (if any).
Gratuity = Average salary * ½ * No. of years of service
In the above gratuity calculation formula, Average salary’ means, it comprises, Basic Salary + DA (Dearness Allowance) + commission (as a percentage of turnover achieved by you, if any).
How about private organizations without paying the DA (Dearness Allowance) also accepted..please share the act if any.
Please send the response to my e-mail ID.
Thank you!
Dear SRINIVAS..If DA is not paid, have to ignore it while calculating the gratuity amount.
I am working in a psu and I will get retire in the month of july 2016 ,our wage revision is due from 01.01. 2017 i want to know that whether I will get the benefit of revised gratuity limits which is increased from 10 lakh to 20 lakh for the central government employees wef 01. 01. 2016
Dear Sktyagi Ji..I believe that you may be eligible for the revised limits. Kindly check with your employer too.
Hi Srikath
I will be retiring in nov 2016 .
Joined the company on 1st april 2012 – .
Will I be eligible for gratuity and if so ,how will it be calculated ,
Pls let me know
THANKS
Dear Sunil..Your service years is less than 5 years but more than 4.5 years. There are various conflicting views available on this one whether gratuity is payable or not. It is better to contact your HR (Human Resource) personnel to get more clarity regarding this point.
Dear Sir
Pl. help me out with this, Thanks in advance.
My prev company rebadged me (along with other 28 employees) with another IT Company w.e.f. 1st December 2015. During my Full and final they paid me Gratuity for 2.5+ years (around 46000/-). Now during income tax filing, will this Gratuity amount come under taxable amount or exemption amount ?
Pl. reply to me ASAP.
Rgds
Rakesh
Dear Rakesh..Kindly note that Gratuity is paid only after 5 years of service (minimum). Did they pay you after 2.5 years? For calculation, kindly refer article.
Dear Sreekanth ji
Thanks for your kind reply.
Yes, they paid me gratuity for 2.5 yrs of tenure according to calculations which I cross checked online. As per my information, employer is bound to pay gratuity after completion of 5 yrs but he may/may not pay it before 5 yrs. In our case, they paid the amount which is around 46k.
But my query is that, whether this gratuity amount is exempted from income tax or I have to pay tax for it ?
If taxable, how much amount is taxable and how to check this calculation ?
Pl. reply
Rgds
Rakesh
Dear Rakesh,
Mostly the amount of Rs 46k is tax-free.
In case, when private employees covered under the payment of Gratuity Act of 1972, any gratuity received is tax exempted to the extent of least of the following:
* Statutory limit of Rs 10 lakh. (Maximum limit / Govt notified amount)
* Last drawn salary * 15/26 * No. of completed years of service.(Refer FAQ 6 )
* Actual Gratuity received by you.
Hi, As per income tax rule In case, when private employees covered under the payment of Gratuity Act of 1972, any gratuity received is tax exempted to the extent of least of the following: Statutory limit of Rs 10 lakh. (Maximum limit / Govt notified amount) Last drawn salary * 15/26 * No. of completed years of service. Actual Gratuity received by you. If the gratuity exceeds the limit mentioned above, then it becomes taxable. In my case it is 78000 as per rule 2 and 92000 as per rule 3.Thus the difference which is 14000 is taxable. But how much I have to pay TAX? Is this 10% always or as per tax bracket in which I am coming? While filing ITR where I need to show/fill this 14000 earning? Is it \”Income from other sources\”?
Dear Rahul,
1 – As per your income tax slab rate.
2 – under the head ‘Salaries’.
Hi Sreekanth
I was due to receive gratuity from my employer after 5 years of service. This was tax free as it was within the limits in IT Act, but due to some confusion, the company deducted tax on the gratuity amount. They are now asking me to claim a refund when i file my return. Can tax wrongly deducted from tax-free gratuity amount be claimed as refund? Please advise.
Dear Sanjay..Yes you can claim it (TDS) as refund while filing your Income Tax Return.
What is commission in gratuity formula? Monthly incentives is taken in consideration? If yes how to consider 10 month average for Quarterly incentive, yearly incentive?
Dear Sojan,
Regarding Gratuity calculation, the definition of ‘last drawn salary’ means, it comprises your Basic Salary + DA (Dearness Allowance if any) only.
My son joined a co. on 27 th june,2010 and worked there till 31st july, 2011. on 1st august 2011 joined another co. and worked there till 21st September, 2015. Please advise that this will be taken as five years of continuous service for being eligible to claim gratuity from the last employer or five years of continuous service should be under the same employer for being eligible for Gratuity.
Dear Mr Nagar,
After completing five years of continuous service with the same company, an employee is eligible to receive the gratuity benefit. Gratuity shall be payable to an employee on the termination of the employment after rendering continuous service for not less than five years.
Hi Sreekanth,
Please advise.. I have completed 6 years of service in a government institution. After 3 years of continuous service, I was given permission to pursue higher degree taking extraordinary leave with out pay for 2 years. For getting permission to study, I had to sign a bond agreement for 5 lakhs binding . to serve the institution for a period of 3 years post- study. But now due to unavoidable circumstances, I resigned from my job paying 5 lakhs to the institution. Am I eligible for gratuity? Thank you
.
Dear Ancy..Though I am not 100% sure, I believe that leaves ‘approved’ (without pay) shall be treated as days worked for the purpose of gratuity calculation, it can be counted as ‘continuity in service’. But salary may be counted for first 3 years only.
Kindly check with your employer too.
I was in job for 30 year in private firm which is not covered under payment of gratuity act .They have not shown the salary they paid to me during those years .Now after my resignation from job they have paid me a lump sum amount by cheque.My question is whether I can claim this amount as gratuity and claim exemption from I.T, in my Return?
Dear Dipak..I am unable to understand your query. They have not shown the salary – May I know what does this mean? Also, one can not claim entire amount (salary) as gratuity.
“For non-government employees (private company employees), who are not covered under the Gratuity Act, the formula for the calculation of gratuity amount is as below;
Gratuity = Average salary * ½ * No. of years of service
In the above gratuity calculation formula, the definition of ‘Average salary’ means, it comprises, your Basic Salary + DA (Dearness Allowance) + commission (as a percentage of turnover achieved by you, if any). To compute ‘Average Salary,’ you have to consider the average of last 10 months salary (Basic + DA + Commission) preceding the month of your retirement/resignation.
Kindly note that in this case, your service period will not be rounded off to the nearest full year. For instance, if you have a total service of 21 years and 10 months, only 21 years will be considered in the calculation.”
Dear sir,
I was in service in private limited company covering under the gratuity act. I completed 6 years and 9 months .Already i have send the Application form I ,& Email again & again but the company not replying.I am from Pune & Company HO at Noida.Now a Days Puna Branch closed permanantly.so pls guide me.
Dear Suvarna..There is no choice and they are bound to pay you the gratuity benefit amount. You can file a case before controlling authority under payment of gratuity act 1972. Suggest you to send an application in form I (which you have already submitted) and if no intimation is received from the company you can file a complaint before the District Labour Officer.
Dear Mr Sreekant Reddy,
Please advise for Proprietorship /Parterneship Company for employees strength 20 or more is Gratuity applicable.
Kindly advise.
Nirmala P Manurkar
Dear Nirmala,
I believe that Gratuity Act is applicable to every firm whether it is a proprietorship or partnership firm or one that is incorporated under Companies Act 1956 provided it is an establishment under the Shops and Establishment Act of the State in which it is located & have more than 10 employees.
Dear Sreekanth Reddy Sir.
Kindly tell me the amendment of gratuity for private companies.The ceiling for non taxable gratuity is 10 or 20
Dear Ranganath ..I believe that it is Rs 10 Lakh only. Even for the Govt employees, the hike in gratuity has not yet been notified.
Dear Sirs,
Please send formula for calculation of gratuity cbse affiliated private school teacher. Which formula applied divided by 26 or 30 reply as soon as possible. Please tell one thing more private school covered under gratuity act 1972 or not?
Dear Virendra..Kindly note that it is mandatory for all the employers with more than 10 employees to pay gratuity. It is divided by 26.
Dear Sreekanth,
One of my family friend retired from a PSU Bank which is covered under Payment of Gratuity Act. The date of retirement was 10th November 2012 where as there was a salary revision with effect from 1st November 2012. Per my understanding, the last drawn salary should be his salary on the date of his retirement. The law only states that it is last drawn salary and not last drawn monthly salary. In this case, please confirm the meaning of “Last Drawn Salary”. Is it the salary for the previous month(October 2012) or the salary as on the date of retirement(November 10, 2012) which will be considered for gratuity calculations.
Regards,
Ram
Dear Ramkumar,
I believe that in this case, the last drawn salary for the month of oct may be considered. (but I am not 100% sure).
I am requesting my Company to get my Gratuity .i have completed more than 6 years of working in the same company .
I have send mail to employer several times but they are not responding .
in this case what shall I do ?
Dear Suvarna,
If company has 10 or more employee then Gratuity act is applicable to them. There is no choice and they are bound to pay you the gratuity benefit amount. You can file a case before controlling authority under payment of gratuity act 1972.
Suggest you to send an application in form I and if no intimation is received from the company you can file a complaint before the District Labour Officer.
For FAQ 8 on max amount of gratuity at 10L, please read Section 4(3) in conjunction with Sec 4(5) of PG Act 1972 and confirm if you would still like to maintain that there is restriction of 10 lacs.
Dear Superman..Kindly provide details as to what needs to be corrected. Kindly share the details in easy to understand manner for the benefit of all blog readers including me, let’s not talk about Sections.
Hi Sreekanth,
I have received my gratuity amount but I did not fill the Form L because of which tax was deducted from the actual amount. When checked with the Finance team, they mentioned that I can claim this when I file my IT returns. I wanted to confirm if this is true. And also do I need to fill the Form L to claim the deducted tax.
Dear Rahul,
Yes, you can claim the TDS amount (if any) while filing your ITR.
Hi Sreekanth,
Am I eligible for gratuity if I have given continuous service of 4 years 8 months and 8 days for the organisation.
I work in a BPO (5 days a week).
Regards,
Santosh.
Dear Santosh,
You may not be eligible for the Gratuity benefit payment. Kindly check with your employer too.
Hi, I joined company ABC and was there for 2.5 yrs, I joined next company PQR after 2 mnths of gap. I was there for 3 years. then I joined company XYZ for 3 months. (Till now my service is 5 years 9months). Unfortunately I had to resign XYZ company since I was pregnant and there was nobody to take care of my baby at home. I again joined same XYZ company after 1 year 3 months. Now my questions are,
1. Am I eligible for Gratuity payment?
2. To whom should I contact or send application?
3. Till now I have not received any gratuity amount from any of my previous employer.
4. Is the gap of 2 months in employer 1 and 2 be considered as GAP for Gratuity? and marked as non eligible for Gratuity?
5. Is the maternity gap of 1 year and 3 months considered as GAP for Gratuity? and marked as non eligible for Gratuity?
Please advise…..
Dear Sarita,
Kindly note that ‘after completing five years of continuous service with the same company, one is eligible to receive the gratuity benefit. Gratuity shall be payable to ‘you’ (employee) on the termination of your employment after rendering continuous service for not less than five years.’
Hi
I have worked for a company for 6 years but in different countries say 3.5 years in India 1 year in Singapore again 1.5 year in India , in total it is 5 years plus.
Companies that is in Singapore is their Singapore branch, in this case am I eligible for Gratuity.
Thanks,
Dear karthik..Kindly check with your employer, I believe you may be eligible for gratuity payment, provided the foreign establishments are part of your parent company.
i am a govt(PSU)servant will retire on 31/05/16. shall i get 10 lakh or 20 lakh as gratuity. pl send the answer to my mail
Dear sir,
I was in service in private limited company covering under the gratuity act. I completed 3 years and 5 months and resigned the company and rejoined after 9 months and completed 2 years and 5 months.
My total service years are more than 5 year, Can get the gratuity at the time leaving?
Thanks.
Dear Ankush,
Kindly note that ‘continuous service for not less than five years’ is required, hence you may not be eligible for gratuity benefit payment. Kindly check with your employer too.
6 years working in a private company, resign 10 month ago may i get my gratuity now.
Hi Sreekanth,
Please Advise…
1. How gratuity will be calculated if my last working day is on 20th of April(means is there any difference in gratuity calculation if I work only 20 days in last month).
Dear Anoop,
Two things are important i) no of service years & ii) also any no of months in excess of 6 months will be considered as 1 year for calculation purposes.
What is taxable limit of Gratuity ?
Is it 10 Lacs ?
Govind Pawar
Dear Govind..I think the 7th Pay Commission recommended enhancement in the ceiling of gratuity from the existing ₹10 lakh to ₹20 lakh from 01.01.2016. But I am not very sure if this is implemented.
Dear Sir,
I am working in private limited company but due to some problems in my company, they have closed the company on 31st August-2015, & i am only one person working in accounts department, I am working in this company w.e.f. 26.12.2011, but now they have give me the 1 month (termination) notice period,
As per above details, can i eligible for my Gratuity Amount????? ….pls. reply for the same….
becs. i am not resigned from company the have also terminate to me…
Pls. reply
Dear Rupesh,
If the company is officially closed in 2015 then your total experience might be counted as less than 5 years right?
In case if your company has 10 (minimum) employees and if your service is more than 5 years then you can claim gratuity benefit from your company.
Hi,
I served for around 5 years in private company. My resignation date was 30th June 2015. Am I eligible for gratuity.
Dear Robin..Yes. As you have already resigned, check your final settlement document if your ex-employer has paid gratuity or not.
Thanks Sreekant. I will followup with them.
Wonder full article.
I have a doubt.
In gratuity ACT where it says if an employee death you have to calculate his service period should consider for entire service assume he will retire at the age of 58.
Dear Eswar..Could you please re-phrase your question??
My company is a joint venture of two companies (A + B) .I joined in September 08 on appointment letter of A and in May 2012 they promoted me and Transferred me to B . for this they made me to resign from A and Gave promotion appointment letter in B .I have been asked to resign with effect from May 7th .
Will i be eligible for Gratuity . there is no gap in my service with organisation.
Dear Manuj..You may kindly check with your employer regarding this.
I have joined a company on 5th Sep 2011 and my last working will be in company on 6th May 2016 i.e. including notice period . So I am about to compete 4yrs 8 months in May 2nd 2016.
I would like to know am I eligible for gratuity?
Regards
Madhavan
Dear Madhavan,
Hmmm..I dont think so. However you may also kindly check with your HR/Finance Dept.
One of my colleague who was on contract employment in a Kerala Government Undertaking attained the age of 58 years in November 2013. As there was no superannuation age for a person in the case of contract employment, He continued in the company till 31 st March 2016 without any break.He has a total continues service period of 22 years and 8 months in the same company till 31 st March 2016.The company says that he has eligibility for gratuity only up to the period of his attaining the age of 58 , the prescribed age limit for the retirement of regular employees as per company norms. However he claims that as he left the organisation after continues service of 22 years and 8 months, he is eligible for the gratuity of 23 years based on the last drawn salary as on 31-03-2016. which contention is correct?.
Dear RAMANARAYANAN..I believe that it depends on the company’s policies & guidelines.
I HAVE RECEIVED GRATUITY AMOUNTING TO RS 2,00,000 FROM PRIVATE COMPANY AND MY AS PER ACT MY GRATUITY IS RS 57400 LIMIT RS. 10,00,0000 PLEASE GUIDE ME HOW MUCH AMOUNT TAXABLE TO ME ?
Dear jaydev..May I know aht is Rs 57,400 here?
In case, when private employees covered under the payment of Gratuity Act of 1972, any gratuity received is tax exempted to the extent of least of the following:
* Statutory limit of Rs 10 lakh. (Maximum limit / Govt notified amount)
* Last drawn salary * 15/26 * No. of completed years of service.(Refer FAQ 6 )
* Actual Gratuity received by you.
If the gratuity exceeds the limit mentioned above, then it becomes taxable.
Are part-time employees eligible to claim gratuity on termination of their employment?
Dear umakanthan..Yes, they are eligible, provided if they complete 5 years of service.
Last year I joined a company. In the offer letter there they said if I achieve my target 200000 USD, they will merge variable pay 25000 into my CTC. Now I had achieved this. They had given new offer letter adding 10k to basic pay and hra 5k and spl allowance 5k and so a new component gratuity of 1923 monthly deducted.
Now, First can a variable pay which is purely dependent on my performance can be deducted as gratuity and employee PF ?
If im a resigning by end of second year, whether I will get the deducted gratuity? If not am I loosing the money ? and so actually they did not raise my CTC?
Its a pvt ltd company.
kindly help.
regards,
rg
Dear RGN,
It depends on your company’s HR policies.
You can get Gratuity benefit amount after rendering continuous service for not less than five years.
Dear Mr.Sreekanth,
Iam working for group of companies. Initially i was getting salary from one company (9 Months) later on getting salary from different company (4 yrs 3 months) this happened with out my concern. But in my salary slip date of join remains same the day i reported
Internally group of companies & accounting also changed but HR policy applicable is same for all.Now i completed 5 years in group of companies.
Do iam eligible for gratuity
Dear Lavanya,
If both are sister concerns, existing under one roof, owned by same directors and employees are working for both the concerns and there is shifting of employees from one concern to another, indicate that both establishments constitute one establishment and therefore the service in another sister concern shall be included to compute five year period. Therefore you can be eligible for gratuity.
You may cross-check this with your employer too.
Sir iam working in pvt ltd eye hospital since 6 year my hospital is not paying gratuity how should i apply for this is their any law or form which i should summit & where
Dear Chandni..Let me know how many no of employees are there in your organisation?
Kindly note that the gratuity rules are not mandatory for the factory or establishment which employs less than 10 persons.
I AM SIXTY YEAR OLD WORKING IN A PRIVATE LIMITED COMPANY AND COMPANY I COVERED UNDER GRATUITY WITH LIC GROUP GRATUITY SCHEME. AM I ENTITLED FOR GRATUITY UPTO 70 YEARS AND SO ON OR I HAVE TO WITHDRAW GRATUITY AFTER 60 YEARS. IS THERE ANY BOND I HAVE TO GIVE TO LIC GROUP GRATUITY SCHEME. KINDLY EXPLAIN ME
Dear ADARSH Ji,
You are eligible to get up to your retirement (based on your company policies). Do check with your employer about this.
I believe that there is no need to submit any bond to LIC.
Whom to contact if the company is delaying in paying the gratuity amount
Dear PROJJAL..Have you resigned from your services? Your employer is supposed to deposit your gratuity within 30 days of resignation.
If gratuity is delayed by the company for any reason, then the employee has legal option against the company. The employee can file an application under the Payment of Gratuity Act in prescribed form and deposit it in the office.You may also approach the Labour Commissioner or Court for appropriate redressal.
My organisation, an NGO has decided to give gratuity while we continue to work in the organisation. We told it is taxable and they cut the tax may be 40% what is rule…please explain
Dear samuel..I am unable to understand your query..
Sir Iam working in sarita fogings /p/ltd as an accountant since 1994 to till date.there is no any benifit as like P.F. and ESI .in this cocern.management is not agree to give me gratuity as per roule
so please give advice ..
Dear Vijay,
It depends on no of employees in the company & as per the company’s policies.
EPF : Minimum 20 employees need to be in the company.
Gratuity : is compulsory if minimum no of employees employed in a company is 10.
can my gratuity be included in my CTC.
Dear Worlikar..CTC IS NOT GOVERNED BY ANY LAW, ANYTHING CAN INCLUDE IN THIS AS PER COMPANY POLICY. Gratuity can be part of your CTC.
Need clarification on entitlement of gratuity if a pvt. ltd. co. doesn’t have adequate staff of 10 or more to fullfill the requirement of gratutity act. in last 12 months.
Dear Pradeep..if staff is less than 10, it is not mandatory for the employer to pay gratuity benefit.
Hi,
I have completed 11 years 7 months at my present company (pvt limited). I am little confused about the Basic Salary calculation thing!! my basic salary structure is
1. BASIC
2. HRA
3. SPECIAL ALLOWANCE
4. MEDICAL REIMBURSEMENT – these are by default salary for a month without any other allowance like shift allowance and performance incentive.
or is it calculated only the 1. BASIC component for gratuity
Ex: 1. Basic: 10Rs, HRA 5 Rs, SA 5Rs, MR 5rs = 25RS is my basic salary, is this the amount calculated for gratuity, please let me know.
Thanks
Prad
Dear Pradeep..for calculation of Gratuity benefit, only BASIC Salary + DA is considered. In you case, it is first point only (Ex – Rs 10).
I have just resigned from my existing organization after completing 8 years. I am joining a new company after serving a notice period of 3 months. I will be getting gratuity as part of the full and final settlement. So is this gratuity amount will be taxable and needs to be declared while filing ITR?
Dear sunny..Kindly go through the article.
I have joined a company on 2 mar 2011 and resigned on 10 Oct 2015. The notice perior was 3 months but they released me in 6 days i.e on 16 Oct 2015
Am i eligible for graduity?
Regards,
Swapana Thorat
Dear Swapana ..have you completed atleast 240 working days in your 5th service year?
There is a lot of confusion in gratuity claims w.r.t the period of service especially when it is around the boundary. For e.g for a service period of 6 yrs 6 months and 16 days.
a. There is no provision in the gratuity form for recording the no of days in addition to years and months. So Should the months be indicated in decimals considering the days also?
b.There is no guideline for round-off of months, what if te period of service is 6 yrs 6 months and 16 days, should the period of service be taken as 6 Years and 6 Months or taken as 6 Years and 7 Months?
Shall be happy if you can please clarify
Dear Sankar,
I believe that if the no of days are more than 15 days, it can be treated as 1 month, though I do not have any source to prove this. Will surely try to find one.
Dear Sir,
My gratuity is reached it’s maximum amount ( 10 lac rupees) I have been working with this private company for more than 30 years, and I am still working with them.
Kindly inform me whether I can claim my gratuity now, since it reached maximum, without leaving the company.
Regards
Thomas
Dear Thomas,
Gratuity benefit is paid only on retirement or resignation. The amount can be higher than Rs 10 Lakh. Your company can pay it as bonus or ex-gratia amount. Kindly check with your employer about this.
I have joined the company on 14-march-2011 & resigned on 30-Nov-2015. I am about to complete 4 years & 9 months service. I would like to request your kindself to please let me know that am I eligible for Gratuity & also suggest me any judiciary cases of such kind are being done recently.
Dear Ramesh.. Is it 2015 or 2014?
I joined a group of companies 4 years back. I worked in one of the company for 3 years and then I have opted for other company of the same group. Now am I eligible for gratuity after completion of 5 years.
Dear Chandrashekhar,
How many employees are there in your new company? You may also check with your employer.
sir,i am working with pvt. ltd company since 2007. there is only 4 number of staff. our company has 2 current a/c in two bank . company did not gave me appointment letter.the company is paying salary from company bank a/c. (some time from one bank some time from other bank a/c). my question is can i claim for gratuity
Dear Harjot,
Paying gratuity benefit is mandatory for all the employers with more than 10 employees. So, to your employer it is an optional thing. Kindly check with them.
Can you please provide a sample gratuity claim letter by Nominee
( Mother wants to write a letter to company to for gratutity claim as son is dead)
Dear Ragenikanth,
You may consider using the below format or templete. (Applicator form for Gratuity claim by Nominee).
To
[Give here name or description of the establishment with full address]
Sir/Gentlemen,
I hereby apply for payment of gratuity to which I am entitled under sub-section (1) of section 4 of the Payment of Gratuity Act, 1972 as a nominee of late……………… [name of the employee] who was an employee of your establishment and died on the …………………. The gratuity is payable on account of the death of the aforesaid employee while in service/superannuation of the aforesaid employee on ………………… retirement of/resignation of the aforesaid employee on ……………… after completion of ……………… years of service/total disablement of the aforesaid employee due to accident or disease while in service with effect from the ………………… Necessary particulars relating to my claim given in the statement below :
1. Name of applicant nominee.
2. Address of full in applicant nominee.
3. Marital status of the applicant nominee (unmarried/married/widow/widower)
4. Name in full of the employee.
5. Marital status of employee.
6. Relationship of the nominee with employee.
7. Total period of service of the employee.
8. Date of appointment of the employee.
9. Date and cause of termination of service of the employee.
10. Department/Branch/Section where the employee last worked.
11. Post last held by the employee with Ticket or Serial No., if any.
12. Total wages last drawn by the employee.
13. Date of death and evidence/witness as proof of death of the employee.
14. Reference No. of recorded nomination, if available.
15. Total gratuity payable to the employee.
16. Share of gratuity claimed.
1. I declare that the particulars mentioned in the above statement are true and correct to the best of my knowledge and belief.
2. Payment may please be made in cash/crossed or open bank cheque
3. As the amount payable is less than Rupees one thousand, I shall request you to arrange for payment of the sum due to me by Postal Money Order at the address mentioned above after deducting Postal Money Order commission therefrom.
Yours faithfully,
Place Signature/Thumb impression of
Date the applicant nominee.
(Kindly note that I have got the above information from delhi.gov.in portal)
Hi Reddy,
In my company(pvt), there is only basic, special allowance etc, there is no DA component paid. In this case, how is Gratuity Amount calculated. Please clarify. Thanks. Karthik
Dear Karthik,
You can consider Basic salary while computing gratuity benefit amount.
What prescribed form must I fill up for exemption of IT. .Please send me same.Cannot find on net
Dear Derrick,
There is no need to submit any form. You have to report your Gratuity benefit (if exempted from taxes) in Income tax return as an ‘exempted income’. This you can find in ITR1 in sheet ‘taxes paid & verification’.
I am planning to take EVR. If my company agrees to pay Gratuity on later date ( to avoid tax burden on me), will there be any objection from Income Tax department?
Dear Salvin..What is EVR? Kindly share about it. Pardon my ignorance.
Dear Sreekanth Reddy,
I received gratuity of 1,02,475 which is fully tax exempted as per rule and filed ITR 1 claiming relief of whole amount u/s 89. But to claim the u/s we need to file 10E. I received intimation from IT u/s 143 (1) with tax relief is 2781 (considering last two year’s income) with tax demand on gratuity. Could you please suggest me how to show the gratuity amount in ITR so that I can get full exempt.
Your early reply would highly be appreciated.
Thanking you in anticipation.
Dear Rana,
If the gratuity of 1 lakh (approx) is exempt, you can declare it as allowance exempt under section 10 of ITR. (or) That means you can declare net salary in ITR. You may declare it in Exempted section too (ITR1 : taxes paid & verification sheet).
Dear Mr. Readdy,
Thanks four your quick response.
Understood that the Gratuity Amount to be shown in Column 26 (Exempt Income only for Reporting Purpose (If agricultural income is more than Rs. 5000/-, use ITR-2 or 2A)
of “Taxes Paid and Verification” Sheet.
A small clarification is required from you that as I already have filed Form 10E and the tax relief u/s 89 is computed to Rs. 2,781 only as per form 10E. What is applicability of form 10
E? Should I revise and re-submit form 10E with NIL Value. The gratuity amount was received for the service of 10 years rendered to the company.
Dear Rana,
I am not very sure about revising Form 10E. Kindly consult a Chartered Accountant.
Thanks Mr. Reddy
sir i have completed my 5 years of service and resingned on 10th of september 2015 when i wll receive my graduity cheque
Dear Karthi..Most of the companies include the gratuity benefit amount as part of the Final Settlement payments. Kindly check with your ex-employer.
Dear Reddy
I have completed 4 years 11 months & 15 days in my current company. On the 16th day i resigned my job. Will i be eligible for gratuity settlement . Appreciate your response
Dear Santosh,
An employee who has completed 4 years and 240 working days in 5th year will be entitled for gratuity i.e. 4 years 10 months and 11 days. So, kindly check with your ex-employer.
I worked in a private engineering college for 13 years and left in 2013, but till now i have not applied for graduaty,can i eligible to apply now .
TDS deducted under salary head
Sir,
1* i have a question what if a govt employee who’s already dead and his heir get gratuity Rs of 700000 but on
that gratuity employer got deduct TDS. Is that gratuity was taxable ? if yes then which head?
2* I f no then how can i claim for refund?
Over and above gratuity exemption limit of 1000000.. Is it by rule or flexibility of employer to select mode of payment as ex gratia ? .
Hi Sreekanth,
Very well explained and in a simplified manner. Both Gratuity as well Leave Encashment part. Keep it up!
Regards,
Sarthak
Thank you Sarthak..Keep visiting 🙂
Srikanth please let me know, is there is any way to get the gratuity directly to the employee bank account like PF, coz in one organisation they are deducting some amount on the Gratuity received from LIC and paying the reduced amount as settlement to the employee.
Dear Gangaa,
The employee can provide his/her bank account details and ask the Employer to settle the payments directly to bank accounts. Or He/she can contact LIC directly and check if it is possible to update bank account details for ‘Direct Transfer’ of monies say through NEFT Transfer.
It is sad to hear that these kinds of issues are happening.
Dear Sreekanth Reddy !
I wish you all the best in life for bringing out such a blog due to which millions like me read and gain knowledge and get benefited .Your each and every article is elaborate and worth reading..May you grow more in your professional career gain more knowledge and keep spreading the same for human recourse.. Thanks ..
Venkat
Thank you so much dear Venkat for your appreciation. Do share the articles with your friends. Keep visiting 🙂
Dear Sir,
I left my previous company after 7 years of service. Company paid me ~2L as lumpsum amount and enrolled me into a LIC Annuity scheme for Quarterly annuity payments. Also in the form 16 it showed the 2L as exempted under Sec 10. I have the following questions
1. My guess is the 2L payment was 1/3rd of the total gratuity amount and the balance 2/3rd has been enrolled under a LIC Annuity scheme with Quarterly payments, please confirm if this understanding is correct?
2. Is the Quarterly payments taxable? Under which head should it be shown in ITR2?
Dear Sumit,
1 – It can be. (Did you work with Govt organisation?)
2 – Annuity is treated as ‘income from other sources’ and is taxable.
Thanks for the answer. I have another question w.r.t ITR2 form
While filling in the Schedule S, I entered all information from my Form 16 from 1-6. However in Step 7 it does not take the deduct the Sec 10 exemption amount. On Compute Tax, as a result it shows tax outstanding which actually should not be the case.
Can you please guide if this is due to an error in the form and to correct it I should subtract the Sec10 exemption before entering the amount in 1.
Dear Sumit..Kindly note that it is tough to advise without looking into the documents. Kindly consult a CA.
Hi ,
I left my 1st pvt organisation after 10 yrs and I got gratuity amount Rs 316275 , Now doing job some other pvt origination. is the gratuity amount is coming under tax assumption.
Dear Laxmikanta..Kindly follow the points mentioned in the article.
In which ITR-1,2 schedule, exemptions Section 10(10AA) are shown ?
Dear TVRAAO..You need to just deduct these allowances and show it in ITR.
I have received a gratuity of Rs.364650/- from a private bank which is covered under Payment of Gratuity Act , 1972 after working for a period of 11 years. Now since I need to file my income tax return for FY 2014-15, I request you to kindly inform me the tax amount payable on the gratuity received.
Dear Premanand,
Kindly follow the below points;
In case, when private employees covered under the payment of Gratuity Act of 1972, any gratuity received is tax exempted to the extent of least of the following:
1 – Statutory limit of Rs 10 lakh. (Maximum limit / Govt notified amount)
2 – Last drawn salary * 15/26 * No. of completed years of service.
3 – Actual Gratuity received by you.
Sir I am an employee of government of karnataka, have put in a service of 9 years, I am resigning from my job, will I be eligible for gratuity,
Dear Umesh..yes you are eligible to receive gratuity benefit amount.
Thanks sir,
But I have heard that government employees will receive gratuity only if they retire from service and they will not get gratuity if they resign from the job, is it true?
Dear Umesh..if an individual has 5 years of continuous service then gratuity benefit amount is payable.
Hello Sir,
I worked in an organisation for 5 yrs 9 months and my last basic salary was 27062 INR. I received 93676 INR as total graduity amount.
Please let me know wheterh this 93676 INR is taxable amount.
Dear Rajashekar,
Did you work for a Govt organisation or a PVT one?
Kindly follow the points mentioned in the article to know the taxation impact on your Gratuity amount.
Hello ,
I worked for a private organisation.
I heard from friends that I need not pay tax if my Graduity amount is less than 1 Lakh INR.
I am confused seeing the details in the above column and feedback from friends.
Pl advise.
Dear Rajashekar,
The gratuity amount received by you is not taxable.
After resignation I received 4 lack as gratuity. As per calculation my gratuity is 1.75 lacs. I have no other salary for this year. Do I need to pay income tax for this 2.25 lacs or file itr.
Dear Vinod,
Yes, it is better you file your ITR and show the amounts. Do you have any other source of income(s)?
Dear sir,
I received Rs. 1.66 lacs as a gratuity in Jan.,2015 after working in an Engg. college for 8.33 years. I left that job in Jan.,2011,but they gave gratuity after 4 years.My present age is 43.Whether this gratuity amount is taxable or not for financial year 2014-15. Please reply soon.
Dear Harsh,
For the delayed payment of Gratuity, employer has to pay interest on it. Did you receive the payment including interest?
When did you receive the amount? (Date)
Regarding taxability, kindly follow the steps mentioned in the article (under Private Employees section)..
I would like to know whether a company should make provision for gratuity for the financial 2015-16, when the number of employees does not exceed 10 numbers. The company was started in 2012-13 and till date, the number of employees has not exceeded ten numbers.
Dear Sujatha,
I believe that Gratuity Act is not applicable in this case.
Hi, please advise:
1. Is gratuity applicable when the company is winding up within 5 years of its inception..?
2. On winding up , what is the gratuity obligation for the employees who has not completed 5 years..?
your early response will be appreciated. Thank you .
Dear Nazia,
Very good question, but I do not have answer to your query. Will surely try to find out..
Dear Reddy,
your suggestions are very useful,please let me know the rules regarding TDS on accrued interest on bank FD. whether TDS deducted on the financial year which interest accrued or TDS on matured interest
Dear Venkatesan,
Thank you!
I recently published an article regarding “Recurring Deposits (RDs)Taxes & Fixed Deposits Taxes.” Kindly read the article. If you still need any clarity, do leave a comment there itself.
Well explained Sree. I realized the value of Gratuity when I left my first job after 4.8 years of experience. I lost a good amount just for few months.
Dear Santanu.
Thank you!
I believe that you are employed in IT industry right? Sad to know that you couldn’t get your gratuity benefit amount. Thank you for sharing your experience here, it might prompt blog visitors/friends to reconsider ‘their decision to quit’ (resignation) during their 4th year of service.
Yes Shree, I am a Software Professional. Actually it was in my initial years when I don’t have much knowledge about personal finance, rules and not that much serious also. Anyway you have documented everything about gratuity in a very elaborate way.
Thank you for your appreciation!