Query on Gratuity

This query is : Resolved

Samir (Querist)
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18 February 2008 Hi,

One of friend is working in a Public limited company. Salary letter given by the company includes Gratuity. He worked there for two years and then resigned. I would like to know is the company liable to pay the him gratuity as his final settlement as it was part of the salary letter which the company never paid as part of his regular salary.

Best regards,
Samir Ambavi

CA. Dashrath Maheshwari

CA. Dashrath Maheshwari (Expert)
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18 February 2008 NO at all, there is a basic condition for gratuity regarding time period, employee should be worked there for at least 5 years.

Samir

Samir (Querist)
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18 February 2008 Even though its part of CTC?

S.Srinivasaraghavan

S.Srinivasaraghavan (Expert)
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18 February 2008 If the terms of letter says that payment will be as per payment of gratuity Act then your friend can not claim, even if it is taken for CTC. On the other hand if it merely says gratuity will be paid at a particular rate, (without reference to Gratuity Act) then your friend is entitled to claim

CA. Dashrath Maheshwari

CA. Dashrath Maheshwari (Expert)
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18 February 2008 No, he is not entitled even its not mentioned that it will be as per act. coz the definition of gratuity is provided in the gratuity act. CTC is being calculated for annual period and is calculated, taking in mind the long term assignment.
It is an understood mean of gratuity that it will be as per graguity act.

S.Srinivasaraghavan

S.Srinivasaraghavan (Expert)
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19 February 2008 The payment of gratuity Act is to ensure payment of gratuity to eligible employees. If a person is willing to compensate more than the Gratuity Act, the Act will not prevent it. Here, in this case a company has contractually agreed to pay a gratuity, which is over and above the Gratuity Act requirement. May be such a payment will not enjoy income tax exemption.

CA. GOPAL SONIKA

CA. GOPAL SONIKA (Expert)
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19 February 2008 Mr Samir, an employee is entitled to gratuity only if he has worked for at least 5 years and not before that.
Further, your friend should have cleared the term grautiy if it was mentioned in his appointment letter as part of CTC.
To add further, your friend should have questioned the management much before, i.e., when he recieved his first salary.
As such Company is not liable to pay him the unpaid part of his CTC as gratuity. However, your friend may seek advice from a income tax legal practioner.

S.Srinivasaraghavan

S.Srinivasaraghavan (Expert)
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25 February 2008 I would like to point out to our learned friends that Statutory eligibility to Gratuity as per payment of Gratuity Act is the minimum a person is entitled to. If an employer contractually agrees to pay more liberal than the Act there is no statutory bar. On the contrary the employer will be contractually bound to honor his commitment if he has committed so. He can not take shelter under the Act, having agreed to pay more. The payment may or may not be allowed as expenditure to the assessee under the Income tax Act or the assessee will not get exemption are different matters.

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