Gratuity Rules: Whether employees will get gratuity for less than 5 years of job or not, know the rules..

Gratuity: You don't have to wait for the completion of 5 years to leave your job! The rules for gratuity have changed now. Earlier, it was a common belief that gratuity is available only after 5 years of continuous service, but now it is not so. According to the new rules, you can be entitled to gratuity even before 5 years. It will be beneficial for you to know the new rules related to gratuity.

Gratuity-

Gratuity, which is a part of CTC (Cost to Company) in many companies, is usually received after 5 years of continuous service. However, under the Gratuity Payment Act 1972, in some situations, you may be entitled to it even before 5 years. If you have completed 4 years and 240 days, you may be eligible for gratuity. It is important to calculate your service period before leaving the job. If the company refuses to pay gratuity (Employees Gratuity Rules), then you can file a complaint with the Labor Department or the court.

Gratuity can be received in 4 years and 240 days-

According to experts, if an employee completes 4 years and 240 days in a company, then he is eligible to get gratuity. For example, if an employee has joined a company on 1 January 2021, then he can get gratuity even if he resigns on 29 August 2025.

What are the rules for getting gratuity?

- The 190-day rule applies to employees who work in mines or in companies that work less than 6 days a week.

- The 240-day rule applies to all other employees.

- If an employee has completed 240 days in the 5th year, it will be considered as a full service of 5 years. In such a case, gratuity will be paid.

Can the company refuse to pay gratuity?

High Courts (HCs) have given different verdicts in such cases. According to the Delhi and Madras HC, an employee is eligible for gratuity after completing 4 years and 240 days. However, Karnataka HC has said that this rule applies only in certain circumstances, such as illness, accident, leave, etc. If the employee resigns voluntarily, he will have to complete the full 5 years.

How is gratuity calculated?

This is the formula for gratuity calculation.

(15 X last salary X service period) / 26

For example, if the last salary of an employee is Rs 40,000 and he has worked for 4 years and 300 days. It will be considered equal to 5 years. How is gratuity calculated in such a case? So, according to the formula, gratuity will be Rs 1,15,385.

(15 X 40,000 X 5) / 26 = Rs 1,15,385

Is there a tax on gratuity?

According to the government rules, gratuity up to Rs 20 lakh is tax-free. If the employee gets gratuity of more than Rs 20 lakh, then the additional amount will be taxed.

Disclaimer: This content has been sourced and edited from Hr Breaking. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.