What is Gratuity?
Gratuity is a lump sum payment made by an employer to an employee as a token of appreciation for services rendered over a long period. It is governed by the Payment of Gratuity Act, 1972.
Educational Purpose: This information is for general awareness only. Consult a qualified legal professional for specific advice.
Eligibility for Gratuity
- Minimum 5 years of continuous service with the same employer
- Applicable to establishments with 10 or more employees on any day in the preceding 12 months
- Payable on superannuation, retirement, resignation, death, or disablement
- In case of death, the 5-year condition is waived
Gratuity Calculation Formula
Example Calculation
If last drawn basic salary = ₹30,000, years of service = 10 years
Gratuity = 30,000 × (15/26) × 10 = 30,000 × 0.5769 × 10 = ₹1,73,077 (approx)
Maximum Gratuity Amount
The maximum gratuity payable under the Act is ₹20,00,000 (20 lakh rupees) as per current provisions.
When is Gratuity Paid?
- Within 30 days from the date it becomes payable
- If delayed beyond 30 days, employer pays simple interest as per rules
- Nominee receives gratuity in case of employee's death
Forfeiture of Gratuity
Gratuity can be forfeited fully or partially if employment is terminated due to:
- Riotous or violent behavior
- Act of moral turpitude
- Offense involving moral turpitude in course of employment
Important Note: The 5-year continuous service condition may be relaxed in case of death or disablement. Part-time and contractual employees may also be eligible in certain cases.
How to Claim Gratuity
- Submit Form I (Application for gratuity) to employer
- Employer issues Form F (Payment receipt) after payment
- If employer refuses or delays, file application with Controlling Authority
- Appeal can be filed before Appellate Authority
Documents Required
- Gratuity claim form (Form I)
- Resignation/termination/superannuation letter
- Service certificate showing years of service
- Last drawn salary certificate
- Bank account details