Do you know the reward for your long service? Know about gratuity, which is a strong financial support for you on retirement or job change. With a salary of Rs 45,000 and 6 years and 9 months of service, you may be entitled to gratuity. Know the eligibility, tax, and calculation methods, so that you can make your financial planning better.
Gratuity
Gratuity is an important financial security for employees, which is given in return for their long service. It is governed under the ‘Payment of Gratuity Act, of 1972’. But, the question is, who is its real owner?
If you work in an organization that has 10 or more employees and you have completed at least 5 years of continuous service, then you are eligible for gratuity. Employees working in sectors like factories, railways, mines, or offices also come under its purview.
Read More:- Lucky ₹20 Note with 786 Can Get You ₹4 Lakh – Here’s How
Read More:- Old Rs 5 Note Could Earn You Up to Rs 1 Lakh Rupees Online: Know How
When is the benefit of gratuity available
Gratuity is paid in many situations, such as:
Resignation after 5 years of service.
Retirement or superannuation.
Dismissal by the employer.
Disability due to accident or illness.
Death (paid to nominee or family).
Under what circumstances is gratuity paid
A minimum of 5 years of continuous service is mandatory for gratuity. If an employee works 6 months or more in a year, it is counted in the next full year. For example, 7 years 1 month will be counted as 7 years.
Which organizations have to provide gratuity
Any organization that has 10 or more employees in the last 12 months is mandatory to provide gratuity benefits. Once covered under the Gratuity Act, they cannot opt out of it.
What is the minimum service required to claim gratuity
As mentioned earlier, a minimum of 5 years of continuous service is mandatory. If an employee works for 6 months or more in a year, it is counted in the next full year.
What are the main factors affecting the gratuity amount
The gratuity amount is based on the following factors:
Last drawn basic pay.
Total years of service (as per the rule given above).
What is the simple formula for gratuity calculation
The standard formula for gratuity calculation:
Gratuity=(Last drawn basic pay×Years of service×15)/26
15 represents 15 days’ of salary per year of service overall.
26 represents working days in a month (excluding Sundays).
What is the importance of gratuity in financial planning
Gratuity acts as a financial safety net for employees after retirement or job change. Using a gratuity calculator helps in estimating benefits and financial planning.
Read More:- RBI Announces Release of New Notes: Find Out What Will Happen to Old Rs 100 and 200 Notes
Read More:- Yogi Ji’s Big Announcement: Get Rs 1 Lakh for Daughter’s Marriage and Scooty