Understanding Gratuity in India
Gratuity is a lump sum amount paid by employers to employees upon separation. It's governed by the Payment of Gratuity Act, 1972.
Eligibility for Gratuity:
- 5-Year Service: You must have completed 5 years of continuous service to be eligible
- Calculation Formula: (Basic Salary × 15 × Years of Service) / 26
- Maximum Limits:
- Private Sector: ₹20 lakhs (since 2018)
- Government: Higher limits depending on rules
- Tax Treatment: Up to ₹10 lakhs is tax-free under Section 10(10C)
Who Qualifies:
- Employees in organizations with 10+ employees (now applies to all)
- Those completing 5 years of continuous service
- Upon resignation, retirement, or termination (except for misconduct)