GRATUITY

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

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

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

Wages

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

FORM
Form A Form B Form C Form D

Forms to be filled
DESCRIPTION
Notice of opening Notice of change Notice of closure Notice of excluding husband from family Withdrawal of the above notice

SCHEDULE

SUBMITTING AUTHORITY
Concerned authority of the area Concerned authority of the area Concerned authority of the area

30 days of Act becoming applicable 30 days of change 60 days before closure

To be submitted to the employer in triplicate. The employer to submit a copy of the same to the concerned authority of the area. 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 E

Forms to be filled
FORM DESCRIPTION Form F Nomination SCHEDULE SUBMITTING AUTHORITY To be submitted to the employer in duplicate. The employer to verify & attest the same and return a copy to the employee To be submitted by the employee within 90 days of acquiring a family To be submitted to the employer in cases where the nominee predeceases the employee To be submitted by the employee within 30 days of gratuity being payable.

Form G Form H Form I Form J

Fresh Nominations Modification of nominee Application for gratuity

Application of To be submitted by the nominee to the gratuity by employer within 30 days of gratuity nominee being payable to him. Application in

Forms to be filled FORM DESCRIPTION SCHEDULE

Form K Form L Application of gratuity by legal heir Notice for payment of gratuity

SUBMITTING AUTHORITY

To be submitted to employer within a year of gratuity being payable 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. 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. 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

Form M

Notice rejecting payment of gratuity Application for direction

Form N

Forms to be filled
FORM Form O DESCRIPTION Notice for appearance before the controlling authority SCHEDULE SUBMITTING 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 R

Notice 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.
The employer will prepare an abstract of the Act and display it at a prominent place where all the employees can see the same.

Form U

Display of abstract