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What is Gratuity?

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What is Gratuity?

Ans – Gratuity is given by an employer to his employee for the services rendered by him during the period of employment. A person is eligible to receive gratuity only if he has completed five years of service with an organization. These five years must be continuous and there should not be any gap in the services of the employee with that company. Gratuity is usually paid at the time of retirement, but can be paid earlier as well, in case of unforeseen conditions such as death of the individual, disabled due to sickness or accident. There is no set percentage of gratuities an employee can receive. The act 1972 covers employees working in mines, companies, ports, plantations and other such establishments that have more than 10 people employees. Both government and non-government employees are entitled to gratuity. However non-government employees come under the Payment of Gratuity Act (1972),

Note 1: The gratuity amount is totally paid by the employer without any contribution from the employee.

Note 1: Up to Rs 20 Lacs Gratuity amounts will be exempt from income tax.

Note 3: Gratuity amounts are calculated on (Basic Salary + DA).

Note 4: In the time of Gratuity calculation services completed by employee above 6 moths assumed it as 1 Years.

Note 5: 4.81% of Basic Salary will be deducted as gratuity

· Eligibility Criteria for Payment of Gratuity?

1. The individual must have resigned from the job after continuous employment with the organization for five years.

2. He/she should have retired from the job.

3. Gratuity is earned in case of the death of that person or if he/she becomes disabled due to sickness or accident.

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