All about payment of Payment of Gratuity Act 1972 in brief including the recent amendments
- Tuesday, July 27, 2010, 9:24
- Income Tax
- 192 views
The Payment of Gratuity Act 1972:- Gratuity is a voluntary Payment made by the employer to the employee in recognition of continuous, meritorious services and sincere efforts by the employee towards the organization.It is governed under the Payment of Gratuity Act 1972.It is an Act to provide for a scheme for the payment of gratuity to employees engaged in factories, mines, Oilfields, plantations, ports, railway companies, and shops or other establishments.
Applicability:-As per the Gratuity Act, the scheme for the payment of gratuity is available to:
- Employees engaged in factories, mines, oilfields, plantations, ports, railway companies, shops or other establishments and for matters connected therewith or incidental with.
- Every shop or establishment within the meaning of any law for the time being in force in relation to shops and establishments in a State, in which ten or more persons are employed, or were employed, on any day of the preceding twelve months;
- Such other establishments or class of establishments, in which ten or more employees are employed, or were employed, on any day of the preceding twelve months, as the Central Government may, by notification, specify in this behalf.
Employee :-The term “employee” is defined in Section 2(e) of the Act as any person (other than an apprentice) who is employed for wages, whether the terms of such employment are express or implied, in any kind of work, manual or otherwise, in or in connection with the work of a factory, mine, oilfield, plantation, port, railway company, shop or other establishment to which this Act applies, but does not include any such person who holds a post under the Central Government or a State Government and is governed by any other Act or by any rules providing for payment of gratuity;’.
Gratuity Entitlement :-Gratuity is payable to an employee (nominee – in case of death of employee) who has rendered continuous service of five years or more on his termination of employment, superannuation, retirement or resignation. Completion of continuous service of five years is not necessary where the termination of employment is due to death or disablement due to accident or disease.
Exceptions:-Forfeiture of gratuity amount wholly or partially or to the extent of Damage /loss in case of an employee whose service has been terminated for:
- Any act, willful omission or negligence causing any damage or loss to, or destruction of, property belonging to the employer; or
- Act of riotous or disorderly conduct or any other act of violence on part of employee; or
- Any act which constitutes an offence involving moral turpitude, in the course of his employment.
Nomination:-In case of death, the gratuity is payable to any of the following persons:
- Nominee
- Heirs (in absence of nomination)
- In case nominee/ heir is a minor, such amount will be deposited with the controlling authority who shall invest the same for the benefit of such minor in such bank or other financial institution, as may be prescribed, until such minor attains majority.
The Gratuity limit has been raised from 3.5 lakhs to 10 lakhs:-There has been amendment in the Payment of Gratuity Act 1972, following proposal of Labor and Employment Ministry, demands from trade unions and others to remove the ceiling or increase the maximum payable amount, which was fixed in 1997. It shall come into force on 24 May 2010 as per the Notification in the Official Gazette.
Maximum Limit :-The Gratuity limit as per Section 4(3) has been raised from 3.5 lakhs to 10 lakhs. This will give advantage to both private and public sector employees. According to this new amendment, the maximum gratuity exemption as per IT Act also increases to Rs. 10,00,000.
Determination of Gratuity Amount
- For every completed year of service or part thereof in excess of six months, the employer shall pay gratuity to an employee at the rate of fifteen days’ wages based on the rate of wages last drawn by the employee concerned.
- The Gratuity calculation is done as per the last average remuneration drawn and time in years served by an employee.
- The amount of gratuity payable to an employee shall not exceed Rs. 10,00,000 (increased from Rs. 3,50,000).
- In order to compute the gratuity payable in case of employees employed in seasonal establishments, daily wages, or piece rated employees. Computation will be as per the provision of the Act.
- It can be formulated as follows: Basic + DA (Wages Last drawn)* 15days 126 * number of years of continuous service (six months or less to be ignored and more than six months to be counted as full year)
| TIME LIMIT / FORMS FOR APPLICATION TO BE MADE TO EMPLOYER | ||||
| Sr. | Particulars | Form | Timeline | Compliance by |
| 1. | Nomination | F | 30 days after completing 1 year service | Employee |
| 2. | Application for Gratuity | |||
|
I | 30 days from the date of gratuity becoming pay-able | Employee | |
|
J | 30 days from the date of gratuity becoming pay-able | Nominee | |
|
K | 1 year from the date of gratuity becoming pay-able | Legal Heir | |
Related posts:
- Gratuity payment under the Payment of Gratuity Act, 1972 or otherwise exempt to the extent covered under the Income Tax Act
- Revised Gratuity Exemption Limit for employees covered under the Payment of Gratuity Act, 1972
- Amendments to the Payment of Gratuity Act- An overview of accounting implications
- Post Amendment all you want to know about taxability of gratuity payment
- Gratuity Limit increased to 10 Lakh as per Income Tax Act and Gratuity Act in Rajya Sabha
The Farmula should be as follows: Basic + DA (Wages Last drawn)* 15days/26days * number of years of continuous service (six months or less to be ignored and more than six months to be counted as full year)
There are may apppeals to the PM, President & Chief Justice of India made by the employees retired from private sector/PSU/Banks/LIC between 1.1.2006 to 23.5.2010 to issue fresh administrative orders to make the effective date as 1.1.2006 i.e. in line with government employees. Trust and hope that the injustice meted to senior citizens is rectified by the result of which these people shall get some reprive when the food inflation is in douible digits.
Would like to know the initial period for eligibility to Gratuity. Whether an employee should be completed 5 years of service or a service of 4 yrs 6 months and above would be considered for payment of Gratuity?
The part time accountant is eligible for the Gratuity. if yes
Kindly send the reply.
Thanks
It appears that GOVT HAS ISSUED GAZETTE NOTIFICATION ON 31.12.2009, BY AMENDNG THE TERM “EMPLOYEE”, THUS MAKING ‘TEACHERS/PROFESSORS” ELEIGIBLE FOR GRATUITY Wef; 03.04.1997. This amendment is mainly to include Teachers.But where the term’ Teachers’ is added in gratuity act, since somof the private school managements are after retired to teachers to show the term ‘teachers’ in the act. any body can help please……
It appears that GOVT HAS ISSUED GAZETTE NOTIFICATION ON 31.12.2009, BY AMENDNG THE TERM “EMPLOYEE”, THUS MAKING ‘TEACHERS/PROFESSORS” ELEIGIBLE FOR GRATUITY Wef; 03.04.1997. This amendment is mainly to include Teachers.But where the term’ Teachers’ is added in gratuity act, since some of the private school managements are after retired teachers to show the term ‘teachers’ in the act. any body can help please……
Read more: http://www.taxguru.in/income-tax/all-about-payment-of-payment-of-gratuity-act-1972-in-brief-including-the-recent-amendments.html/comment-page-1#comment-84856#ixzz0uu4lBNeU
The term “teacher” is added in the gratuity amendment bill 2009. I have a copy of the same but do not know how to attache it. Whoever needs it, please send me a mail on id: krishnappa.salian@yahoo.in
Hi,
I have joined my commpany on 22nd May 2006 as a trainne(not on company’s payroll) and got confirmed on 1st January 2007 (on company’s pay roll). Every year from then on Gratutity forms a part of my CTC. Hence, I would like to check if I am eligible to get the gratuity amount if I resign on 1st April 2011. The notice period in my company is 3 months and hence If I resign on 1st April 2011, I would be relevied from my services on 31st June 2011. Please advice so that I can take my decision accordingly.
YOU ARE NOT APPLICABLE FOR GRATUITY..
Is it correct that the amendment made in gratuity act for teachers, the calculation of gratuity for teachers has to be done treating their date of joining as april 1997 even if the teacher was serving say from from 1980? If this teacher retires in 2000 , is the teacher not entitled for gratuity as the teacher has not completed 5 years of service from 1997? Kindly clarify the amendment made in the act.
Then what is the limit of period to work ina a company to get gratuity?
ANY EMPLOYEE COMPLETED TENUARE OF SERVICE 4 YEARS, 6 MONTHS 11 DAYS..& RETIRED…HAS HE ELIGIBLE FOR GRATUITY????
Dear Sir
I have worked in the organisation from dated 15/11/2001 to 5/08/2011 , will i be elegible for the gratuity .
I have submitted the resign dated 21/07/2011 for releaving dated 5/08/2011
Regards
Rahulpreet Singh
ANY EMPLOYEE COMPLETED TENURE OF SERVICE 4 YEARS, 11 MONTHS & HAS RESIGNED. IS HE ELIGIBLE FOR GRATUITY????
It appears that GOVT HAS ISSUED GAZETTE NOTIFICATION ON 31.12.2009, BY AMENDNG THE TERM “EMPLOYEE”, THUS MAKING ‘TEACHERS/PROFESSORS” ELEIGIBLE FOR GRATUITY Wef; 03.04.1997. This amendment is mainly to include Teachers.But where the term’ Teachers’ is added in gratuity act, since some of the private school managements are after retired teachers to show the term ‘teachers’ in the act. any body can help please……
I am working in unaided educational institution from Feb 1988 as a office superintendent our institution covered under employees Provident Fund Act 1952 & affiliated with CBSE New Delhi. But Gratuity Act not available what is latest law for the institution.
Sir,
Is there any amendment in No. of days 15 to 25 in calculation of gratuity, under Gratuity act 1972.
Now it is calculated as Basic+DA*15* no. days (service)/26.