As per the govt. norms, gratuity is known as a monetary benefit provided by the employer to a retired employee for the services rendered to the organization for at least 5 years.
When it involves availing the payment of gratuity period, the employee must apply for the payment of gratuity form within 30 days after filling the gratuity form. Usually, gratuity is paid at the time of retirement, but you’ll also claim it if you change your job after serving a minimum period of getting gratuity. The five-year condition for gratuity payout isn’t applicable if the employee becomes disabled or dies while still in service.
Before you check all the basic details about what we get into its formula, eligibility, and calculation, understand first what gratuity is. This information will facilitate you in acknowledging its significance and understanding the whole term.
The Payment of Gratuity Act 1972 was implemented in September 1972 to provide monetary benefits to employees who have offered extended years of service to one employer.
According to the eligibility rules, companies/establishments that employ ten or more people are automatically covered under the Payment of Gratuity Act, of 1972.
Gratuity = (Working tenure x Last drawn salary)15/26, where the last drawn salary includes basic salary and dearness allowance.
Gratuity = (Working tenure x Last drawn salary x 15)/30, where the last drawn salary includes basic salary, dearness allowance, and commissions.
To receive the gratuity employee must meet the eligibility rules:
Gratuity received by the general public sector employees apart from the statutory corporation is tax-free. The tax on gratuity payout depends on the character of employment and employee. The three major gratuity categories include:
The gratuity payout for state employees (state/central/local authority) falls under the tax exemption.
15 days’ salary out of the last salary is eligible for tax exemption.
The minimum amount out of the three scenarios is going to be considered for tax exemption:
There are multiple types of forms, which you can check here.
|A||Notice of Change|
|B||Notice of Change|
|C||Notice of Closure|
|I||Gratuity payment application|
|K||Gratuity payment application for the legal heir|
|J||Gratuity payment application for the nominee|
|G||Make new nomination|
|L||Issued by the employer to the employee stating the date and amount of payment|
|N||Application made to the labor commission by an employee|
|O||Issued by the authority to appear for a case hearing|
|M||Issued by the employer to the employee stating the reason for a rejection|
|P||Summons issued by the authority to be present for the hearing|
|R||Issued by the authority directing to make gratuity payment|
|T||Application for Recovery of Gratuity|
|U||Abstract of the Act and Rules|
Employees can claim their gratuity by completing the Gratuity form I. On the gratuity form I, you need to write all of the specified information such as the claimant’s full name, address, employee id number, department during which you worked, date of appointment, total service period, explanation for termination, and last drawn salary.
You can get your Gratuity Form PDF from a government department or website. This Form cannot be downloaded from anywhere. You need to take it from the government. However, we make a way convenient for you. You can directly download the gratuity form from the UBS HR toolkit. There are multiple forms involved in the process of obtaining the gratuity amount, and each form serves a different purpose, you can download the whole combo here.
You can download the gratuity form from UBS HR Toolkit.
As we discussed above, gratuity is a monetary benefit that employees get after retirement. The employee must fill out the gratuity form “I” under the act within 30 days from which the payment of the gratuity is due. An employee can file the form after knowing the date of superannuation or retirement.
These all are complex processes that everyone has to do. However, UBS can handle all your payroll, taxation, variable related problems by helping with payroll and HR software. Also, You can download the HR Toolkit to make the burden low and easily make the process of form filling.