Gratuity Rules: The lump sum amount given to an employee on leaving the job or retiring is called gratuity.
According to the Gratuity Payment Rule 1972, an employee becomes entitled to receive gratuity after completing five years of service in any company or organization. Generally everyone knows this, but do you know that one can get the benefit of gratuity even before completing 5 years.
If you are not leaving the company only because of gratuity, then let us tell you that you can become eligible for gratuity even before completing 5 years.
Gratuity will be given on completion of 4 years 240 days
Very few people know that in some situations, gratuity can be received even before 5 years. If you have completed 4 years and 240 days in a company or organization, then you may be entitled to gratuity. Therefore, you must calculate your service period before leaving the job. Suppose if your company refuses to give gratuity, then you can file your complaint in the labor department or court.
According to experts, if an employee completes 4 years and 240 days in a company, then he is eligible to get gratuity. For example, if an employee joins a company on 1 January 2021, then he can take gratuity even after resigning on 29 August 2025, even if 5 years are not completed but he has worked for 4 years and 240 days in the company.
If you want to get gratuity on leaving the job, then keep in mind that the period of your work in the company should be at least 4 years and 8 months. Only after this you will be eligible for gratuity. That is, employees who serve for less than 4 years and 240 days will not get gratuity. Please note that 5 years of service is not necessary in case of death or disability of an employee.
Rules for getting gratuity
If an employee has completed 240 days in the 5th year, then it will be considered as complete service of 5 years and he will be paid gratuity amount.
Can the company refuse to pay gratuity?
In such cases, the High Court has given different verdicts. For example, according to Delhi and Madras HC, an employee is entitled to gratuity after completing 4 years and 240 days. At the same time, Karnataka HC says that this rule applies only in certain circumstances, such as illness, accident, etc. If the employee resigns voluntarily, then he will have to complete 5 years in the company to get gratuity.
How is gratuity calculated?
This formula (Gratuity Calculation Formula) is used to calculate gratuity
(15 x last salary X service period) / 26
For example, if the last salary of an employee is Rs 45,000 and he has worked for 4 years and 290 days in the company, which will be considered equivalent to 5 years. So according to the formula, his gratuity will be Rs 1,29,808.
(15 X 45,000 X 5)/26 = Rs 1,29,808
Maximum tax-free gratuity limit\\
Gratuity payment is tax-free, but the government has set a limit for it. According to the rules, gratuity up to Rs 20 lakh is tax free. That is, if someone gets more gratuity than this, then the employee will have to pay tax on the amount above Rs 20 lakh.
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