Question 1

What is gratuity?

Accepted Answer

Gratuity is a lump sum amount paid by employers to employees upon retirement or separation after completing minimum service period. It's a form of reward for loyalty and long-term service.

Question 2

What is the minimum service period for gratuity?

Accepted Answer

Under Payment of Gratuity Act, 1972, employees must have at least 5 years of continuous service to be eligible for gratuity. Service less than 5 years is not eligible unless employment ended due to death/disability.

Question 3

How is gratuity calculated?

Accepted Answer

Gratuity = (Last drawn monthly salary × 15 × Years of service) / 26. The 15 and 26 are fixed factors prescribed by law. It's based on basic salary plus dearness allowance.

Question 4

Is gratuity taxable?

Accepted Answer

Gratuity is tax-free up to ₹20 lakh. Amount exceeding ₹20 lakh is taxable. Also, if gratuity is received before completion of service tenure, different provisions may apply.

Question 5

Who is covered under the Gratuity Act?

Accepted Answer

Gratuity Act covers all organizations with 10+ employees. Small organizations may follow specific rules. Government employees have separate gratuity provisions. Check applicable rules for your organization.

Question 6

Can I receive gratuity if I resign?

Accepted Answer

Yes, if you have completed 5 years of service. Gratuity is payable on resignation, retirement, or superannuation. For involuntary separation due to employer action, eligibility may be more liberal.

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Gratuity Calculator Tool

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