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GRATUITY

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Introduction

Paid for faithful continuousservice in the organization

Payable on completing 5 yearsof continuous servicewith theorganization

Includes probation period

The above rule is waived of inthe eventuality of

Death

Permanent disablement

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Applicability

Applicable to those

organizations where employee

strength is more than 10

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Family

Himself/ Herself

Spouse

Children (married or unmarried)

Dependent parents

Dependent in-laws Widow & children of

predeceased son

Adopted children

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Superannuation Attainment of age for vacating employment

Retirement Termination of employment other than

superannuation

Wages

Earned while on duty or on leave. Includes DA

Does not include bonus, HRA, overtime,commission etc.

Definitions

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Payment of Gratuity

Gratuity can be paid to an employeewhen He is superannuated

Resigned/ retired after 5 years ofcontinuous service

Permanent disablement

Death

If a person has completed 240 daysin a year on his/ her fifth year ofservice, he/ she is eligible forgratuity

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Calculation

The formula for calculating

gratuity is as follows

[(Salary*15)/26]*serviceperiod

Where,

Salary = Basic + DA

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Calculation of gratuity in

CTC 5% of basic salary

In some cases it is actually 4.81%

which is rounded up to the nearestinteger

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Taxability

Not taxable up to the ceiling of3.5 lakhs.

Any amount above the same will

be taxable.

The ceiling is applicable only

once during the entire service

periode.g.: If the person changes his job

more than once, then he will avail

the benefit of tax savings upto 3.5lakh onl once.

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Withdrawal of gratuity

Non transferable

The LIC draws a cheque in the

favor of the organization/Gratuity Trust

In turn draws cheque in favor of

the employee

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Forms to be filledFORM DESCRIPTION SCHEDULE SUBMITTING

UTHORITYFormA Notice ofopening 30 days of Actbecoming

applicable

Concernedauthority of the

area

Form

B

Notice of

change

30 days of

change

Concerned

authority of the

areaForm

C

Notice of

closure

60 days before

closure

Concerned

authority of the

area

Form

D

Notice of

excludinghusband from

family

To be submitted to the employer in

triplicate. The employer to submit acopy of the same to the concerned

authority of the area.

Form

E

Withdrawal of

the above

notice

To be submitted to the employer in

triplicate. The employer to submit a

copy of the same to the concernedauthorit of the area.

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Forms to be filledFORM DESCRIPTION SCHEDULE SUBMITTING

UTHORITYForm

F

Nomination To be submitted to the employer in

duplicate. The employer to verify &

attest the same and return a copy to

the employee

FormG

FreshNominations

To be submitted by the employee within90 days of acquiring a family

Form

H

Modification

of nominee

To be submitted to the employer in

cases where the nominee predeceases

the employee

Form

I

Application

for gratuity

To be submitted by the employee within

30 days of gratuity being payable.

Form

J

Application of

gratuity by

nominee

To be submitted by the nominee to the

employer within 30 days of gratuity

being payable to him. Application in

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Forms to be filledFORM DESCRIPTION SCHEDULE SUBMITTING

UTHORITYForm

K

Application of

gratuity bylegal heir

To be submitted to employer within a year of

gratuity being payable

Form L Notice for

payment of

gratuity

On verification of claims, the employer

issues a notice to the employee/ nominee/

legal heir about the amount of gratuity

payable within 15 days of the receipt ofnotice. The payment should be made within

30 days of the receipt of application.

Form

M

Notice

rejecting

payment of

gratuity

On verification, if the employer finds the

claim inadmissible, the employer may issue

a notice to the employee/ nominee/ heir

specifying the reasons for rejecting theclaims.

Form

N

Application for

direction

In the above case, if the employer fails to

give reasons then the employee/ nominee/

heir can apply within 90 days of submission

of Form L to the concerned authority of thearea

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Forms to be filledFORM DESCRIPTION SCHEDULE SUBMITTING

UTHORITYForm

O

Notice for

appearance

before the

controlling

authority

On receipt of Form N, the concerned

authority may call the applicant and

the employer to appear before him on

a specified date, time & place.

Form

R

Notice for

payment of

gratuity

On verifying the claims, the

controlling authority issues a notice

to the employer to make the payment

to the employee within 30 days of the

issue of the notice.

Form

U

Display of

abstract

The employer will prepare an abstract

of the Act and display it at a

prominent place where all the

employees can see the same.