This document summarizes the rules around gratuity payments for employees in organizations with more than 10 employees. It discusses who is eligible for gratuity payments after 5 years of continuous service, how the amount is calculated based on salary and years of service, tax treatment, forms to submit for payments, withdrawals, and nominations. Gratuity can be paid upon superannuation, resignation after 5 years, permanent disability, or death.

1. GRATUITY

2. Introduction Paid for faithful continuous service in the organization Payable on completing 5 years of continuous service with the organization Includes probation period The above rule is waived of in the eventuality of Death Permanent disablement

3. Applicability Applicable to those organizations where employee strength is more than 10

4. Family Himself/ Herself Spouse Children (married or unmarried) Dependent parents Dependent in-laws Widow & children of predeceased son Adopted children

5. 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

6. Payment of Gratuity Gratuity can be paid to an employee when He is superannuated Resigned/ retired after 5 years of continuous service Permanent disablement Death If a person has completed 240 days in a year on his/ her fifth year of service, he/ she is eligible for gratuity

7. Calculation The formula for calculating gratuity is as follows – [(Salary*15)/26]*service period Where, Salary = Basic + DA

8. Calculation of gratuity in CTC 5% of basic salary In some cases it is actually 4.81% which is rounded up to the nearest integer

9. Taxability Not taxable up to the ceiling of 3.5 lakhs. Any amount above the same will be taxable. The ceiling is applicable only once during the entire service period e.g.: If the person changes his job more than once, then he will avail the benefit of tax savings upto 3.5 lakh only once.

10. 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

11. Forms to be filled To be submitted to the employer in triplicate. The employer to submit a copy of the same to the concerned authority of the area. Notice of excluding husband from family Form D Concerned authority of the area 60 days before closure Notice of closure Form C To be submitted to the employer in triplicate. The employer to submit a copy of the same to the concerned authority of the area. 30 days of change 30 days of Act becoming applicable SCHEDULE Withdrawal of the above notice Form E Concerned authority of the area Notice of change Form B Concerned authority of the area Notice of opening Form A SUBMITTING AUTHORITY DESCRIPTION FORM

12. Forms to be filled To be submitted to the employer in cases where the nominee predeceases the employee Modification of nominee Form H To be submitted by the employee within 30 days of gratuity being payable. Application for gratuity Form I To be submitted by the nominee to the employer within 30 days of gratuity being payable to him. Application in plain paper is also accepted. Application of gratuity by nominee Form J To be submitted by the employee within 90 days of acquiring a family To be submitted to the employer in duplicate. The employer to verify & attest the same and return a copy to the employee SCHEDULE Fresh Nominations Form G Nomination Form F SUBMITTING AUTHORITY DESCRIPTION FORM

13. Forms to be filled 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 the claims. Notice rejecting payment of gratuity Form M 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 the area Application for direction Form N 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 of notice. The payment should be made within 30 days of the receipt of application. To be submitted to employer within a year of gratuity being payable SCHEDULE Notice for payment of gratuity Form L Application of gratuity by legal heir Form K SUBMITTING AUTHORITY DESCRIPTION FORM

14. Forms to be filled 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. Notice for payment of gratuity Form R The employer will prepare an abstract of the Act and display it at a prominent place where all the employees can see the same. 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. SCHEDULE Display of abstract Form U Notice for appearance before the controlling authority Form O SUBMITTING AUTHORITY DESCRIPTION FORM