As per the Gratuity Act. an employee is eligible to get the gratuity amount only after the completion of 5yrs of continous service in the organisation, but if the employee completed 4yrs 4 month and 17 Days and he is leaving the company,Is he eligible for gratuity?
How will we calculate the amount??
Formula for gratuity calculation:
Basic*15/26* no. of years
e.g. : Basic = Rs. 10,000/-
No. of years = 15 years
Gratuity = 10,000*15/26*5
= Rs. 28,846.15/-
Not as you calculated:
the calculation should be:
If PF salary is 10,000 and number of years served in the company is 15 then,
10000 * 15/26 * 15 (not 5 as mentioned by you)...
hope this clears your doubt ...
and as per rule, if he has worked below 5 years, he is not eligible for gratuity.
Eligibility for Gratuity: Five years of Continuity service. Even though service is 4 yrs 11 months, he / she is not eligible for Gratuity.
Gratuity Formula: Last drawn Basic/26*15 days * No of years service completed
If service is 5 yrs 6 or 7 months, Gratuity should be calculated for 6 yrs.
Grautity Formula : Basic + Da * 15 * No of Years / 26
26: No of Working Days per Month i.e Common
For Example :
If an eployee working more than 6 months treat as one year. But you want to calculate correct amount then use this formula
For 10 Years 2 Months 15 Days
For One Year approximately 2 month goes to leave that is govt holidays..
so we take 10/12 = 0.83
0.83 * 2.15 ( that is month and days )
we get 1.7845 then we take year as 10.17845
grautity = 6000 (Basic 4000 DA 2000) * 15 * 10.17845 / 26
Gratuity is paid out at the time of superannuation (if you retire at the age of 58), when you retire (at any other age) or resignation, and in the event of your death or being rendered disable because of an accident or illness. You need to have at least five full years of service with an employer to qualify for gratuity. This rule is relaxed in the last instance. In the event of your death, the gratuity will be paid to your nominee.
# last drawn monthly salary as on date is taken into account
# if total period served with the current employer is less than 5 years no gratuity is payable to any individual
# for calculation of gratuity period served at a stretch with one employer is counted
# salary includes only basic pay and dearness allowance
# seasonal establishments are not covered in this calculator
# salary remains same for the last ten month
# only commission on salary paid on turnover basis is included
CASE-1 You are covered Under the Payment of Gratuity Act, 1971:
Gratuity shall be calculated as per the below formula:
Gratuity = Last drawn salary x 15/26 x No. of years of service
Your last drawn salary will comprise your basic + DA. For computation of gratuity, your service period will be rounded off to the nearest full year.
CASE-2 You are not covered Under Payment of Gratuity Act, 1971
Gratuity shall be calculated as per the below formula
Gratuity = Last drawn salary x ½ x No. of years of service
Your last drawn salary will comprise your basic + DA+ commission on sales on turnover basis. For computation of gratuity, your service period will not be rounded off to the nearest full year. While calculating completed years, any fraction of the year will be ignored. For instance, if the employee has a total service of 20 years, 10 months and 25 days, only 20 years will be factored into the calculation.
Death-cum-retirement gratuity received by employees of central or state governments and local authorities is exempt without limit.
Gratuity received under the Payment of Gratuity Act, 1971 is exempt to the extent that it does not exceed 15 days' salary for every completed year of service calculated on the last drawn salary subject to a maximum of Rs 3.5 lakh.
Any other gratuity is exempt to the extent that it does not exceed one half-month salary’s for each year of completed service calculated on the basis of average salary for 10 immediately preceding months subject to a maximum of Rs 3.5 lakh.
The ceiling of Rs 3.5 lakh applies to the aggregate of gratuity received from one or more employers in the same or different years.
1.Completed years of service: More than 6 months service will be counted as full year of service i.e. 1 year 7 month will counted 2 years
2.Max. Gratuity payable under the Act is Rs. 3,50,000*/- * Please confirm it, This is exempted from tax if drawn after the retirement or leaving the job.
As per the gratuity act an employee is eligible for gratuity only if he has completed a contineous period of 5 or more years.
Gratuity is payable for 15 days per year for a period the empoyee has worked in the organization. Also note that after the completion of 5 years every period in excess of 6 months is treated as one completed year. For example if an employee has worked for 6 years and 8 months than he will be eligible for a gratuity of 7 years.
Gratuity is calculated as (Basic + DA)x 15 x no of years/26.
Thanx Zaman for sharing important information.
i was confused between superannuation and retirement but today my that doubt is cleared. thanks