Every employee should know about the gratuity. It gives him/her a big amount at the time of leaving a job. The gratuity is the right of an employee and an employer can’t decline it. I have listed 5 most important things of the gratuity. To know more about the gratuity you should read my detailed post about the gratuity.

5 Important Things About Gratuity

  1. You get the gratuity only after five years of the service. Your service should be in one organization and there should not be any break. When we calculate the years, the period is rounded to the nearest integer. Thus, a service of more than 4 years and 6 months is considered as 5 years and you become eligible for gratuity.
  2. It is mandatory to give gratuity if your organization employs more than 10 people. The government has made a law in this regard.
  3. Gratuity paid to government employees is exempt from tax. The private employee can get tax-free gratuity up to Rs.20 lakh. Any excess amount would be taxable. This limit is applicable to your total gratuity in the lifetime.
  4. The amount of gratuity depends upon your last drawn basic salary and period of service. As a gratuity, you get 15 days salary for each year of service. So, your 15 days basic salary is multiplied by the years of service.  Note, to get a 15-day salary, the month is considered only for 26 working days.
  5. The employer pays the gratuity amount. Unlike the EPF scheme, the expense on gratuity is not a part of the CTC salary. The employer has to pay minimum gratuity according to the formula. The formula is given below.
Last Drawn Monthly Basic Salary  X Years of Service   X  15/26

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