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Tuesday, May 12, 2009

few things you will have to know about Gratuity...

What is Gratuity?

This is the cash amount given by the Employers to its resigning/retiring employees who had served their organizations for more than 5 years time. This is something like a cash reward from the employers to its loyal employees.

In early days, only few generous organizations gave gratuity to its employees, but later the Government made this mandatory (the Payment of Gratuity Act, 1972) for all employers with more than 10 employees.

When will you be eligible for the Gratuity?

Only those who are hired on company payroll as Employees and have worked for more than 5 years will be eligible for this Gratuity amount. It is to be noted that the training period (if any before the allotment letter) will not be considered for the service period.
It is always better to discuss this with the concerned persons, when joining an organization.

What will be the gratuity amount?

Gratuity amount will be calculated based on the daily salary (Basic+All Allowances) during the time of retirement/resignation. As per the Government act, Gratuity amount is the 15 days daily salary multiplied by the number of years worked in that organization.

Assume your monthly salary is 25,000/- per month and your company normally has 25 working days/month, which makes the daily salary to be Rs. 1000/-. Hence after 5 years of service, the graduity amount would be 1000 x 15 x 5 = Rs.75000/-

Will there be any tax on this gratuity amount?

For employees working for private organizations, the gratuity amount up to Rs.350000/- is free from tax. However for Government employees this limit does not exist - i,e. any amount is non-taxable.



Blogger Hari said...

Mr VettyOfficer,

This is indeed an very useful information, which will help ppl in making decisions , ok atleast me. Hope you will post more such posts in the future.

- Hari

5:01 AM  

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