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How to calculate salary in case of gratuity payment

Tax queries 11231 views 5 replies

As per my knowledge Gratuity calculation formula is :

Salary x 15 / 26 x no. of years worked

 

I just wanted to know as per law how to calculate

1) Salary --- (Wheather it is last drawn salary or average of last 10 month salary or something else)

2) No. of Years worked (Suppose a person worked for 4 years 11 months his applicability can we say this is 5 Years  or suppose a person worked for 5 years 3 months can we say this is 6 years like this how to roundoff the years of service)

 

Please reply

Thanks

 

Replies (5)

 

The formula is ...
 
15/26* last drawn salary * completed years of service or part thereof in excess of 6 months
where salary = basic salary+ DA (whether forming part or not)
and that too is true only if the employee is covered under payment of gratuity act
if the employee isnt covered under payment of gratuity act
then the calculation is
1/2* Average monthly Salary * Completed Years of Service
Salary = Basic Salary + DA (if terms so provide) + Commission (based on fixed %tage of t/o)
Average Monthly Salary=  average salary of last 10 months immediately preceeding the month of retirement....
i hope now its a bit clear to u
moreover the period of service once is qualified i.e. 5 years of continuous service doesnt make any changes in calculation of exempted gratuity
 

 

thanks for your reply can you please tell me how to know that or i mean how to know that which company comes under covered under payment of gratuity act

Thanks

If covered under gratuity act- 10 months immediately preceeding the DATE of retirement.

If not under Gratuity Act- 10 months immediately preceeding the MONTH of retirement.

I have two question

1) how to know that it comes under gratuity act or not

2) if under gratuity act (current salary or 10 months immediately preceeding the DATE of retirement)

or if not under gratuity act ( average of 10 months from month of retirement)

Please clear my doubts

HI all, GM, in my organisation, in salary payment, grade pay is also paid as per pay scale (Grade pay+pay+DA+HRA+OA). Should we add this grade pay amount while calculating basic pay for gratuity workings. Because for calculating DA & HRA basic pay is arrived by adding Grade pay and Pay. Request to clear my doubt.


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