GRATUITY

Introduction  Paid for faithful continuous service in the organization  Payable on completing 5 years of continuous service with the organization  Includes probation period  The above rule is waived of in the eventuality of  Death  Permanent disablement

Applicability  Applicable to those organizations where employee strength is more than 10

Family  Himself/ Herself  Spouse  Children (married or unmarried)  Dependent parents  Dependent in-laws  Widow & children of predeceased son  Adopted children

 Superannuation  Attainment of age for vacating employment  Retirement  Termination of employment other than superannuation  Wages  Earned while on duty or on leave.  Includes DA  Does not include bonus, HRA, overtime, commission etc. Definitions

Payment of Gratuity  Gratuity can be paid to an employee when  He is superannuated  Resigned/ retired after 5 years of continuous service  Permanent disablement  Death  If a person has completed 240 days in a year on his/ her fifth year of service, he/ she is eligible for gratuity

Calculation  The formula for calculating gratuity is as follows – [(Salary*15)/26]*service period Where,  Salary = Basic + DA

Calculation of gratuity in CTC  5% of basic salary  In some cases it is actually 4.81% which is rounded up to the nearest integer

Taxability  Not taxable up to the ceiling of 3.5 lakhs.  Any amount above the same will be taxable.  The ceiling is applicable only once during the entire service period e.g.: If the person changes his job more than once, then he will avail the benefit of tax savings upto 3.5 lakh only once.

Withdrawal of gratuity  Non transferable  The LIC draws a cheque in the favor of the organization/ Gratuity Trust  In turn draws cheque in favor of the employee

Forms to be filled FORMDESCRIPTIONSCHEDULESUBMITTING AUTHORITY Form ANotice of opening30 days of Act becoming applicable Concerned authority of the area Form BNotice of change30 days of changeConcerned authority of the area Form CNotice of closure60 days before closure Concerned authority of the area Form DNotice of excluding husband from family To be submitted to the employer in triplicate. The employer to submit a copy of the same to the concerned authority of the area. Form EWithdrawal of the above notice To be submitted to the employer in triplicate. The employer to submit a copy of the same to the concerned authority of the area.

Forms to be filled FORMDESCRIPTIONSCHEDULESUBMITTING AUTHORITY Form FNominationTo be submitted to the employer in duplicate. The employer to verify & attest the same and return a copy to the employee Form GFresh Nominations To be submitted by the employee within 90 days of acquiring a family Form HModification of nominee To be submitted to the employer in cases where the nominee predeceases the employee Form IApplication for gratuity To be submitted by the employee within 30 days of gratuity being payable. Form JApplication of gratuity by nominee To be submitted by the nominee to the employer within 30 days of gratuity being payable to him. Application in plain paper is also accepted.

Forms to be filled FORMDESCRIPTIONSCHEDULESUBMITTING AUTHORITY Form KApplication of gratuity by legal heir To be submitted to employer within a year of gratuity being payable Form LNotice for payment of gratuity On verification of claims, the employer issues a notice to the employee/ nominee/ legal heir about the amount of gratuity payable within 15 days of the receipt of notice. The payment should be made within 30 days of the receipt of application. Form MNotice rejecting payment of gratuity On verification, if the employer finds the claim inadmissible, the employer may issue a notice to the employee/ nominee/ heir specifying the reasons for rejecting the claims. Form NApplication for direction In the above case, if the employer fails to give reasons then the employee/ nominee/ heir can apply within 90 days of submission of Form L to the concerned authority of the area

Forms to be filled FORMDESCRIPTIONSCHEDULESUBMITTING AUTHORITY Form ONotice for appearance before the controlling authority On receipt of Form N, the concerned authority may call the applicant and the employer to appear before him on a specified date, time & place. Form RNotice for payment of gratuity On verifying the claims, the controlling authority issues a notice to the employer to make the payment to the employee within 30 days of the issue of the notice. Form UDisplay of abstractThe employer will prepare an abstract of the Act and display it at a prominent place where all the employees can see the same.