Mba hr
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
02 July 2013
sir,
Can you please tell me the calculation of gratuity.
Can you please tell me the calculation of gratuity.
03 July 2013
DEAR MEMBER,
noted that During the 5 years, employee is eligible for casual leave and sick leave without affecting his eligibility.
In case of death of an employee , the above condition 5 Years of continuous service is not applicable i.e. even if an employee dies
after 2 years of service , he/she is still eligible for gratuity .
formula
********
Gratuity Calculation =[ (Basic Pay + D.A) x 15 days x No. of years of service ] / 26
e.g. : Basic = Rs. 10,000/-
No. of years = 15 years
Gratuity = 10,000*15/26*5
= Rs. 28,846.15/-
must read:
https://www.moneycontrol.com/personal-finance/tools/gratuity-calculator.html
noted that During the 5 years, employee is eligible for casual leave and sick leave without affecting his eligibility.
In case of death of an employee , the above condition 5 Years of continuous service is not applicable i.e. even if an employee dies
after 2 years of service , he/she is still eligible for gratuity .
formula
********
Gratuity Calculation =[ (Basic Pay + D.A) x 15 days x No. of years of service ] / 26
e.g. : Basic = Rs. 10,000/-
No. of years = 15 years
Gratuity = 10,000*15/26*5
= Rs. 28,846.15/-
must read:
https://www.moneycontrol.com/personal-finance/tools/gratuity-calculator.html
05 August 2013
The gratuity is exempted from tax and the required section is as below
Gratuity paid to private sector employees - Gratuity received by employees in the private sector will be exempt to the extent mentioned in the latter half of section 10(10) and the remaining amount of the gratuity (i.e., the full amount of the gratuity received by the employee less the part thereof which is exempt under section 10(10), will be entitled to relief under section 89(1).
In the case of gratuity funds approved for the purpose of the Income-tax Act, a provision authorising the payment of gratuity to an employee while he continues to remain in service should not be allowed.
The latter half of section 10(10) should be regarded as covering the case of only a gratuity payment on the employee’s retirement or on his becoming incapacitated or on termination of his employment or on his death. Gratuity paid while an employee continues to be in service is not exempt under section 10(10) though it is entitled to relief under section 89(1).
Rules of approved gratuity funds should not permit payments in the form of annuities.
Exemption under section 10(10) should not be denied only on the ground that the gratuity paid by the employer has been calculated on the basis of three weeks’ salary or one month’s salary for each year of the completed service—Letter : F. No. 1(79)-62/TPL, dated 13-12-1962.
Resignation is also covered - The expression ‘termination of . . . employment’ used in section 10(10), covers the case of any employee whose service comes to an end due to resignation—Letter : F. No. 194/6/73-IT (A-I), dated 19-6-1973.
Limits specified under section 10(10)(iii) - Limit specified for all the three purposes mentioned in section 10(10)(iii) is raised to Rs. 3,50,000* in relation to employees referred to in that sub-clause who retire, or become incapacitated prior to such retirement, or die, on or after 24-9-1997, or whose employment is terminated on or after that date—Notification : No. 10772 [F. No. 200/77/97-IT(A-I)], dated 20-1-1999.
Gratuity paid to private sector employees - Gratuity received by employees in the private sector will be exempt to the extent mentioned in the latter half of section 10(10) and the remaining amount of the gratuity (i.e., the full amount of the gratuity received by the employee less the part thereof which is exempt under section 10(10), will be entitled to relief under section 89(1).
In the case of gratuity funds approved for the purpose of the Income-tax Act, a provision authorising the payment of gratuity to an employee while he continues to remain in service should not be allowed.
The latter half of section 10(10) should be regarded as covering the case of only a gratuity payment on the employee’s retirement or on his becoming incapacitated or on termination of his employment or on his death. Gratuity paid while an employee continues to be in service is not exempt under section 10(10) though it is entitled to relief under section 89(1).
Rules of approved gratuity funds should not permit payments in the form of annuities.
Exemption under section 10(10) should not be denied only on the ground that the gratuity paid by the employer has been calculated on the basis of three weeks’ salary or one month’s salary for each year of the completed service—Letter : F. No. 1(79)-62/TPL, dated 13-12-1962.
Resignation is also covered - The expression ‘termination of . . . employment’ used in section 10(10), covers the case of any employee whose service comes to an end due to resignation—Letter : F. No. 194/6/73-IT (A-I), dated 19-6-1973.
Limits specified under section 10(10)(iii) - Limit specified for all the three purposes mentioned in section 10(10)(iii) is raised to Rs. 3,50,000* in relation to employees referred to in that sub-clause who retire, or become incapacitated prior to such retirement, or die, on or after 24-9-1997, or whose employment is terminated on or after that date—Notification : No. 10772 [F. No. 200/77/97-IT(A-I)], dated 20-1-1999.
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