Here are five things to know about payment of gratuity:
1) The Union Cabinet had in September last year given its approval for introduction of the Payment of Gratuity (Amendment) Bill in the Parliament. The amendment will increase the maximum limit of gratuity of employees, in the private sector and in public sector undertakings/autonomous organisations under government, bringing them at par with central government employees.
2) Currently, formal sector workers with five or more years of service are eligible for a tax-free gratuity up to Rs 10 lakh after leaving job or at time of superannuation.
3) The move to amend gratuity rules for formal sector workers comes after the limit for central government employees was hiked to Rs. 20 lakh, according to recommendations of the 7th pay commission. The relevant amendment for central government employees was notified on July 25, 2016 and the enhanced ceiling amount made effective from January 1, 2016.
4) How gratuity is calculated: According to the current formula for formal sector workers, the gratuity amount depends upon the tenure of service and last drawn salary. It is typically calculated according to this formula:
Last drawn salary (basic salary plus dearness allowance) X number of completed years of service X 15/26
An employer can however give higher gratuity than the amount under the prescribed formula.
5) The main purpose for enacting this Act is to provide social security to workers after retirement, whether retirement is a result of the rules of superannuation, physical disablement or impairment of any vital part of the body. The Payment of Gratuity Act, 1972 applies to establishments employing 10 or more persons.
Election Results for Lok Sabha Election 2019 will be out on May 23. Get the latest election news and live updates on ndtv.com/elections. Catch all the action on NDTV Live. Like us on Facebook or follow us on Twitter and Instagram for news updates from each of the 543 parliamentary seats for the election 2019