Gratuity Calculation Formula In India: On February 1, 2025, employees working in private or public sector can get a big gift. If the Central Government accepts the suggestions of the trade unions, then it is possible that you may get more gratuity on retirement or resigning from the company after working continuously for 5 years. In the pre-budget meeting with Finance Minister Nirmala Sitharaman, the Central Trade Unions raised the issue of Gratuity Calculation Rules., While reviewing it, a demand has been made to make changes in it so that workers and employees can get more gratuity on retirement.
There will be change in gratuity calculation
The Central Trade Unions have submitted their demands to the Finance Minister regarding the budget to be presented on February 1, 2025. It has been demanded that the government should review the rules of gratuity calculation. These organizations have demanded from the Finance Minister to increase the calculation of gratuity payment to one month’s salary instead of 15 days’ salary so that workers and employees can get more gratuity on retirement. Not only this, the Central Trade Unions have also demanded from the Finance Minister to remove the fixed limit of Rs 20 lakh for gratuity payment. Under the current rules, the maximum limit of gratuity payment is Rs 20 lakh and no income tax has to be paid on this amount, that is, this amount is completely tax-free.
What is gratuity?
Gratuity is the amount given to employees as a reward for the services they have rendered to their employer. This is given to the employee in return for his long-term services in the organization on his retirement or leaving the company after a period of 5 years. Gratuity is a component of the gross salary of any employee but it is not given regularly. Rather, a lump sum payment is made when the employee leaves the company.
How is gratuity calculated?
Gratuity is calculated on the basis of the salary of the employee or worker and is decided separately for each employee as per the company policy. To get gratuity, it is necessary to provide continuous service in any company for at least 5 years. However, this rule does not apply in case of death or disability of the employee. To calculate gratuity for a period of 5 years, 240 days in a year are counted as working days. The formula for gratuity calculation is as follows.
(15 x last month’s salary x total number of years of service) / 26
In this, gratuity is paid on the basis of 15 days’ salary. The last month’s salary includes Basic Salary along with Dearness Allowance. And 26 i.e. 30 days of the month in which four Sundays are not included.
When is gratuity given?
- On retirement of any employee from service
- When eligible for retirement
- On resignation after serving the same company continuously for 5 years.
- In case of death of an employee or becoming disabled due to illness or accident
read this also
Budget 2025: Know who demanded increase in corporate-wealth tax in the budget and said to impose Inheritance Tax!
