Big Gratuity Rule Update: Get Paid Even Before 5 Years, Know

Apart from the Employee Provident Fund (EPF), gratuity is also a big financial benefit for salaried employees. Usually, people know that gratuity is given only when an employee works continuously for at least 5 years in a company or organization.

But do you know that under certain circumstances, the benefit of gratuity can be availed even before the completion of 5 years? Do you also want to know how you can get gratuity even before 5 years? So let’s know.

How much minimum service is required for gratuity

According to the Gratuity Act (Payment of Gratuity Act 1972), any employee has to serve at least 5 years continuously to get a gratuity. But very few employees know that in some cases, one gets the right to get gratuity even after completing 4 years and 240 days of service.

The reason for this is the definition of ‘continuous service’ in the law. As per this definition, if an employee completes 240 days in the fifth year of employment, he can be considered eligible for gratuity. Also, the minimum service period rule does not apply in case of death or disability.

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Know the legal aspects

As per Section 4(1) of the Gratuity Act, gratuity is paid only when an employee completes at least five years of continuous service. At the same time, as per Section 2A, if an employee completes at least 190 days (in mines or companies with less than 6 days of work) or 240 days (in other companies) within the last 12 months, he is considered to be in ‘continuous service’. On this basis, if an employee completes 240 days in his fifth year, he is considered to have completed five years of service and becomes eligible for gratuity.

Know the tax rules

Gratuity payments are tax-free, but there is a limit to it. Gratuity up to a maximum of Rs 20 lakh for an employee is tax-free. If an employee receives more than this amount of gratuity, then tax will have to be paid on that additional amount.

Gratuity is an important financial security measure for employees. However, most people are unaware that they can be entitled to it even without completing 5 years. Therefore, it is important to understand these rules before leaving the job so that the maximum benefit of gratuity can be availed.

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