Table of Contents
How is gratuity deducted and paid?
Gratuity is part of your CTC. 4.81\% of basic pay will be deducted as gratuity. It will be paid only if you serve the same company for 5 years. Yes, gratuity is part of CTC.
How is gratuity paid to employees?
Gratuity Amount: (15 * 50,000 * 11) / 30 = Rs. Gratuity Amount is equal to one-fourth of the last-drawn basic salary of an employee for each completed six-month period. The retirement gratuity amount which is payable is 16 times the basic salary.
What is the rule of gratuity in India?
At present, gratuity is fixed on the basis of salary of 15 days every year on completion of five years job. The employee worked for 20 years in the same company and his final salary is 60 thousand rupees. This salary is divided by 26, as 26 days are considered for gratuity. This will yield an amount of Rs 2,307.
Is gratuity and PF same?
Unlike employee provident fund which includes employee’s contribution, the gratuity amount is entirely paid by the employer. Under the Payment of Gratuity Act, 1972 a certain percentage of the salary is calculated and deposited in a gratuity account payable later.
Can gratuity be deducted from an employee’s salary?
Seeking your guidance. There is no concept of deduction of gratuity from the employee, it is basically a provision which would be consider as the cost to the company. It also depends upon the companies to make their own provision in terms of maintaining accounts.
What is the formula for gratuity calculation?
For calculation of gratuity of employees in such organisations, the formula is – Gratuity = (15 x last drawn salary x number of completed years of service) / 26 The last drawn salary includes basic and dearness allowance (DA). Any other component of income will not be included in the salary.
Which gratuities are exempt from tax?
A gratuity of up to Rs.20 Lakh paid by organisations covered under the Payment of Gratuity Act, 1972, other than central and state government departments, defence, and local governing bodies, is exempt from tax as per the gratuity rules 2020.
How is Gratuity calculated on BASIC PLUS Dearness Allowance?
Companies usually deduct 4.81\% of your basic plus dearness allowance towards gratuity payment. This 4.81\% is computed as (15/26)/12. Effectively, it is half a month’s salary on a base of a year’s salary.