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Private and PSU’s Employees will Receive Rs. 20 Lakh Gratuity: Details

Private and PSU’s Employees will Receive Rs. 20 Lakh Gratuity

Private and PSU’s Employees will Receive Rs. 20 Lakh Gratuity

Central Government gave a gift to Private and PSU’s Employees. Central government has increased the gratuity limit from Rs 10 lakh to Rs 20 lakh on the basis of 07th Pay Commission panel. As per the Gratuity act, 1972, a company that is having more than 10 employees, have to pay gratuity to its employees after completion of 5 year service or more.
 After implementation in this act, formal sector workers will be able to get Gratuity upto Rs 20 lakh without any tax. Central trade unions have agreed on the suggestion of hike in ceiling of Gratuity in a tripartite consultation with the Labour Ministry. Employees can withdraw up to Rs 20 lakh from their gratuity funds now onwards.

Revised Gratuity Act:

Before the ceiling of the tax free gratuity was Rs. 10,000/- but after Seventh Pay Commission rules it has been increased upto Rs. 20 lakh according to the Revised Gratuity Act. According to the new rules it is also decided that gratuity limit will be increased by 25% whenever dearness allowance (DA) will be increased by 50%.

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Rules of Gratuity:
  • Employer, who had employed more than 10 employees in their company, has to pay gratuity to their employees. Those, who have less than 10 employees, need not to pay gratuity.
  • Gratuity will be paid to the employees, who have worked more than or equal to 5 years in one company.
  • A person will be eligible for the gratuity only after completion of the job it can be retirement or resignation or switch to other job.
  • Gratuity would not be given after death of the person or disability.
  • Private employees, who are paid gratuity at time of their job, they have to pay tax on their salary but Government employees need not to pay tax on their gratuity.  

How to Calculate Gratuity ?

If you want to know your Gratuity amount after retirement or leaving job, you can use simple formula that is given here to get exact value of the Gratuity Funds. To calculate Gratuity Funds, you need to know Basic Pay, D.A (Dearness Callowness) and Total year of Services (must be more than or equal to 5 years).

Gratuity = [ (Basic Pay + Dearness Callowness) x 15 days x  Total years of service ] / 26

Example to Calculate Gratuity:

Let your Monthly Salary is 50,000/-, Basic Pay is 13000/- and DA is 5,500/-, then you can calculate your Gratuity Funds as following below:

Gratuity = [(13,000 + 5,500) x 15 days x 10] / 26
Gratuity = [(18,500) x 150] / 26
Gratuity = 27,75,000 / 26
Gratuity = Rs 106730.769

Demand of the Union:

All India Trade Union Congress (AITUC) accepting the maximum Gratuity limit of Rs 20 lakh but along with this unions demand that the limit in order to the number of employees and years of service should be removed. It is said that All India Trade Union Congress is urging to the Government for removing this ceiling. The unions also demanded to increase the rate of wages for each completed year of service by 30 days wages from 15 days wages.

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