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:
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:
Nomination:-In case of death, the gratuity is payable to any of the following persons:
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
|TIME LIMIT / FORMS FOR APPLICATION TO BE MADE TO EMPLOYER|
|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|