Gratuity is defined as per section

Section 2A - Continuous service : Payment of Gratuity Act 1972 What is Continuous service? Section 2A of Payment of Gratuity Act 1972 Section 2A of Payment of Gratuity Act 1972 : "Continuous service" 2A. For the purposes of this Act, - (1) an employee shall be said to be in continuous service for a period if he has, for that period, been in uninterrupted service, including service which may be interrupted on account of sickness, accident, leave, absence from duty without leave (not being absence in respect of which an order treating the absence as break in service has been passed in accordance with the standing order, rules or regulations governing the employees of the establishment), lay off, strike or a lock-out or cessation of work not due to any fault of the employee, whether such uninterrupted or interrupted service was rendered before or after the commencement of this Act. (2) where an employee (not being an employee employed in a seasonal establishment) is not in continuous service within the meaning of clause (1), for any period of one year or six months, he shall be deemed to be in continuous service under the employer - (a) for the said period of one year, if the employee during the period of twelve calendar months preceding the date with reference to which calculation is to be made, has actually worked under the employer for not less than - (i) one hundred and ninety days, in the case of an employee employed below the ground in a mine or in an establishment whic...

In most cases, an employer offers gratuity out of his own funds or may approach an insurer to get a group gratuity plan. If the employer goes for a life insurer, he has to pay annual contributions as decided by the insurer. The employee is also free to make contributions to his gratuity fund. The gratuity will be paid by the insurer based upon the terms of the group gratuity scheme. • What is gratuity? In layman terms, gratuity is the chunk of salary that employees receive from the employer in regards to their services given to the organization. It is a benefit plan or you can think of as a post-job perk that you get from the employer after you leave your job. • What are the eligibility criteria to get gratuity? In accordance with Section 10 (10) of the Income Tax Act, an employee is entitled to get gratuity post-completion of a minimum of 5 years of service with the employer that means 240 days a year at least. • Will I get an interest in gratuity? Apparently, yes. If the employer makes a delay in the payment of gratuity, you are entitled to get a simple interest in gratuity from the due date of the payment made. • What is the maximum gratuity amount an employee can receive? Irrespective of the number of years of service of the employment, you will not be able to receive a gratuity amount of more than Rs 10 lac from your organization.

Salary consists of so many components like Basic, DA, HRA, Bonus, Commission, Allowances and Perquisites. But while calculating Gratuity, HRA, EPF and value of perquisites for rent free/concessional house we need to consider only few components of salary. So let us look into detail about those considerations. 1) Salary definition for Gratuity– A) Gratuity covered under Payment of Gratuity Act 1972-For this purpose salary means only Basic salary and Dearness Allowance (DA). No other salary components will not be considered for calculaiton. B) Gratuity not covered under Payment of Gratuity Act 1972-For this purpose salary means Basic salary, Dearness Allowance (DA) and Commission (if paid as a % of turnover). Remember while considering salary in the case of (B) Gratuity not covered under Payment of Gratuity Act 1972 DA need to be considered only if it is forming part of retirement benefit otherwise not to consider. Also Commission should be in the form of % of turnover not lump sum payment. 2) Salary definition for House Rent Allowance (HRA)-For calculation of House Rent Allowance (HRA) you need to consider Basic Salary, Dearness Allowance(DA) and Commission (if paid as % of turnover). Again in this case too DA need to be considered if it is forming part of retirement benefit otherwise not to consider and Commission also need to % of turnover. 3) Salary definition for Employee Provident Fund (EPF)– For calculation of salary components under employer’s contribution towards re...

In most cases, an employer offers gratuity out of his own funds or may approach an insurer to get a group gratuity plan. If the employer goes for a life insurer, he has to pay annual contributions as decided by the insurer. The employee is also free to make contributions to his gratuity fund. The gratuity will be paid by the insurer based upon the terms of the group gratuity scheme. • What is gratuity? In layman terms, gratuity is the chunk of salary that employees receive from the employer in regards to their services given to the organization. It is a benefit plan or you can think of as a post-job perk that you get from the employer after you leave your job. • What are the eligibility criteria to get gratuity? In accordance with Section 10 (10) of the Income Tax Act, an employee is entitled to get gratuity post-completion of a minimum of 5 years of service with the employer that means 240 days a year at least. • Will I get an interest in gratuity? Apparently, yes. If the employer makes a delay in the payment of gratuity, you are entitled to get a simple interest in gratuity from the due date of the payment made. • What is the maximum gratuity amount an employee can receive? Irrespective of the number of years of service of the employment, you will not be able to receive a gratuity amount of more than Rs 10 lac from your organization.

Salary consists of so many components like Basic, DA, HRA, Bonus, Commission, Allowances and Perquisites. But while calculating Gratuity, HRA, EPF and value of perquisites for rent free/concessional house we need to consider only few components of salary. So let us look into detail about those considerations. 1) Salary definition for Gratuity– A) Gratuity covered under Payment of Gratuity Act 1972-For this purpose salary means only Basic salary and Dearness Allowance (DA). No other salary components will not be considered for calculaiton. B) Gratuity not covered under Payment of Gratuity Act 1972-For this purpose salary means Basic salary, Dearness Allowance (DA) and Commission (if paid as a % of turnover). Remember while considering salary in the case of (B) Gratuity not covered under Payment of Gratuity Act 1972 DA need to be considered only if it is forming part of retirement benefit otherwise not to consider. Also Commission should be in the form of % of turnover not lump sum payment. 2) Salary definition for House Rent Allowance (HRA)-For calculation of House Rent Allowance (HRA) you need to consider Basic Salary, Dearness Allowance(DA) and Commission (if paid as % of turnover). Again in this case too DA need to be considered if it is forming part of retirement benefit otherwise not to consider and Commission also need to % of turnover. 3) Salary definition for Employee Provident Fund (EPF)– For calculation of salary components under employer’s contribution towards re...

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Section 2A - Continuous service : Payment of Gratuity Act 1972 What is Continuous service? Section 2A of Payment of Gratuity Act 1972 Section 2A of Payment of Gratuity Act 1972 : "Continuous service" 2A. For the purposes of this Act, - (1) an employee shall be said to be in continuous service for a period if he has, for that period, been in uninterrupted service, including service which may be interrupted on account of sickness, accident, leave, absence from duty without leave (not being absence in respect of which an order treating the absence as break in service has been passed in accordance with the standing order, rules or regulations governing the employees of the establishment), lay off, strike or a lock-out or cessation of work not due to any fault of the employee, whether such uninterrupted or interrupted service was rendered before or after the commencement of this Act. (2) where an employee (not being an employee employed in a seasonal establishment) is not in continuous service within the meaning of clause (1), for any period of one year or six months, he shall be deemed to be in continuous service under the employer - (a) for the said period of one year, if the employee during the period of twelve calendar months preceding the date with reference to which calculation is to be made, has actually worked under the employer for not less than - (i) one hundred and ninety days, in the case of an employee employed below the ground in a mine or in an establishment whic...