Regarding query in gratuity

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Onisha Maheshwari (Querist)
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22 December 2010 what is the reason because of which meaning of salary changes with regards to gratuity when GRATUITY ACT 1972 is applicable and when it is not applicable?

CA SURENDRA KUMAR RAKHECHA

CA SURENDRA KUMAR RAKHECHA (Expert)
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23 December 2010 Gratuity is a retirement benefit which is based on Basic Salary & D.A.

.

This is one time payment to the employee to support him in his old age.

.

Since he loses his earning capacity

(in other words he is unable to serve to the employer so other facilities are abandoned after his retirement);

hence only BASIC salary and DA is included for the purpose of Gratuity.

.

Till he is in employment; he receives many allowances and facilities ( due to his services rendering ) hence these are known as part of salary.

.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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23 December 2010 Section 4 of The Payment of Gratuity Act, 1972 describes the manner in which Gratuity would be calculated.

To harmonise the calculation under both the Acts definition of Salary has been fine tuned with PGA 1972.

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