Gratuity eligibility criteria may be relaxed; here’s how to calculate the balancePage Visited: 13
The Central government is considering relaxing the minimum eligibility condition for gratuity payments to employees. It is planning to lower the threshold from five years of continuous employment to between one and three years amid growing demand to make the gratuity eligibility criteria shorter.
The Parliamentary Standing Committee on Labour, in a recently tabled report, had recommended that the existing period of five years of continuous service for gratuity payment to employees should be reduced to one year.
Under the Payment of Gratuity Act, 1972, an employee who has worked in a company for over five years is eligible for gratuity by his/her employer.
The Act states that all employees, who are involved in factories, mines, oilfields, plantations, ports, railway companies, shops or other establishments, in which 10 or more persons are employed, are required to be paid gratuity by their employers.
Gratuity is paid mainly at a time of retirement, but in certain conditions it can be paid even before retirement.
There is no set percentage for the amount of gratuity that an employee is supposed to receive. The amount payable depends upon the last drawn salary and years of service of the employee.
Gratuity is defined as a benefit plan and is one of the major after-job perks received from an employer.
Here are three ways to calculate one’s gratuity balance:
– An employee can visit the Income Tax Department’s website (www.incometaxindia.gov.in website). Click on ‘Tax Tools’ option and search Gratuity from the available options. The given calculator will compute the amount of gratuity payable with respect to the input values such as assessment year, type of employer, gratuity received, exempted gratuity and taxable gratuity.
– A employee can check with his/her employer or with the human resource department in the organisation with regards to the gratuity balance or amount.
– The formula for calculating gratuity is 15 x (last drawn salary) x (tenure of working)/26 (days). For instance, employee X’s last drawn salary is Rs 50,000 per month and has worked with ABC Ltd for about 30 years. So, his gratuity will be calculated as: (15 x 50,000 x 30)/26= Rs 9,37,500. In this formula, the time period of more than six months is considered as one year.