GRATUITY

 GRATUITY- sec.10(10)

Meaning-Gratuity is a benefit that is payable under the Payment of Gratuity Act 1972. Gratuity is a sum of money paid by an employer to an employee for services rendered in the company. But, gratuity is paid only to employees who complete five or more years with the company.

Gratuity is a financial component offered by an employer to an employee in recognition of his/her service rendered to an organisation. It is a part of the salary an employee receives and can be viewed as a benefit plan designed to aid an individual in his/her retirement.

For exemptions of death-cum-retirement gratuity employee have been classified into 3 categories

1. Gratuity received by Government employees– full exempt 

2. Gratuity received by the other employee who are covered undergraduate Act 1972

Least of following amount is exempt from tax

1. 15/26) × Last drawn salary × completed year of service or part thereof axcess of 6 month.

2. ₹ 20,00,000/10,00,000.

3. Gratuity actually received.

7 days in case of employees of seasonal establishments.

Salary= last drawn salary including DA but excluding any bonus, commision HRA Overtime and any allowance, benefit or perquisites.

     C) Gratuity received by other employees who are not covered under graduate 1972.

Least of following amount is exempt from tax; 

1. Half months every salary × completed year of services 

2. ₹ 10,00,000/20,00,000.

3. Gratuity actually received.

Average salary = Average salary of the last 10 months immediately preceding the retirement.

Salary= Basic pay + DA( to the extent forms part  of retirement benefits) + turnover based commission.