Gratuity Act is a statutory benefit paid to the employees who have rendered continuous service for at least five years. It is an Act to provide for a scheme for the payment of gratuity to employees engaged in factories, mines, Oilfields, plantations, ports, railway companies, and shops or other establishments. In some cases, they even pay higher. To lose him may be a loss to the employer. Employee means any person other than an apprentice employed on wages to do any skilled, semi- skilled, or unskilled, manual, supervisory, technical or clerical work, whether the terms of such employment are express or implied and whether or not such person is employed in a managerial or administrative capacity. The maximum amount of gratuity payable under the Act is Rs. This Paper attempts to highlight the various critical issues pertaining to this Act along with its applicability and efficacy.
But whereas the calculation will be rounded off to the next higher or lower fraction after his 5 yrs completion. I worked in an organization for 7 years and 2 months. You may refuse to accept browser Cookies by activating the appropriate setting on your browser. How Gratuity works and taxation. Once the Act becomes applicable to an organization i. I completed 7 yrs and 10 months of service as of July 2017. For calculating the wages last received, the amount of wages paid for any overtime shall not considered.
Gratuity is an important form of social security and is in the form of a gratitude provided by the employer to the employees in monetary terms for the services rendered by them to the organisation. The same is subject to Sections 4 5 and 4 6 of the Act. The government mandates employers to pay the gratuity amount within 30 days. The Court proceeded to analyse Section 4 5 and Section 4 6 of the Payment of Gratuity Act. If an employer makes any false statement or false representation in order to avoid any payment to be made by himself under the Act or of enabling any other person to avoid such payment shall be punishable with imprisonment for a term which may extend to six months or with fine which may extend to ten thousand rupees or with both.
Although, there is an upper limit of Rs 10 lakhs for the tax concessions. The provisions of the Act were meant for laying down gratuity as one of the minimum service conditions available to all employees covered by the Act. However, employer of an establishment belonging to or under the control of the Central Government or the State Government are exempted from operations of these provisions. If there is any dispute as to the amount of gratuity payable, or about admissibility of any claim, or the person entitled to receive the gratuity, the employer shall deposit with the controlling authority such amount he regards as payable. If an employer makes any false statement or false representation in order to avoid any payment to be made by himself under the Act or of enabling any other person to avoid such payment shall be punishable with imprisonment for a term which may extend to six months or with fine which may extend to ten thousand rupees or with both. If the service is interrupted by causes other than those enumerated above, it will not be deemed to be continuous. If the period to be reckoned is 6 months then the above minimum number of days will be not less than 95 days in the case of mines and 120 days in other cases.
The pre-requisite of completion of continuous service of five years shall not be necessary where the termination of the employment of any employee is due to death or disablement to the extent that the person is literally unable to provide the required services. No such interest shall be payable in case the delay in the payment is due to the fault of the employee and the employer has obtained permission in writing from the controlling authority for the delayed payment on this ground. Such cookies and other technologies helps us to identify you and your interests, to remember your preferences and to track use of zeenews. Session Cookies Session cookies are temporary and deleted from your machine when your web browser closes. The Act continues to be applicable to any establishment or institution even if the number falls below 10 subsequent to its coverage.
In computing the gratuity payable to an employee who is re-employed, after his disablement, on reduced wages, his wages for the period preceding his disablement, shall be taken to be the wages received by him during that period, and his wages for the period subsequent to his disablement shall be taken to be the wages as so reduced. For example, if the employee has a total service of 20 years, 10 months and 25 days, only 20 years will be factored into the calculation. The government is preparing to reduce the time limit of five years of employment at an organisation for gratuity payment to three. This gratuity is payable to the employee: a On his superannuation, or b On his retirement or resignation However, there is an exception where the condition of working continuously for five years with an organisation is not applicable. Death -cum-Retirement Gratuity received by other employees who are not covered under Gratuity Act, 1972 other than Government employee Subject to certain conditions. Gratuity is dependent upon the total number of years served in the company and the last drawn salary. Under sub-Section 6 b ii of the Act, forfeiture of gratuity is permissible only if the termination of an employee is for any misconduct which constitutes an offence involving moral turpitude, and convicted accordingly by a court of competent jurisdiction.
This forfeiture of gratuity was challenged before the High Court wherein the Single Judge, without interfering in the dismissal from service, held that since the misconduct did not lead to financial loss to the Bank, the Respondent was entitled to gratuity. The Appellate Authority- The Dy. As per sources, the Ministry of Labour has asked for feedback from the industry bodies on the proposal to the reduce the time limit. First of all they do not have full 5 year term for the employee joining in mid year of contract. The Act states that if an employee's services are terminated due to any act, wilful omission or negligence causing damage or loss to or destruction of property of the employer, the employee's gratuity shall be forfeited to the extent of damage or loss.
The age limit of the dependants has been enhanced from 18 to 25. The full amount of gratuity can be forfeited if an employee's services have been terminated due to: a His riotous or disorderly conduct or any other violent act; b Committing an offence involving moral turpitude. Gratuity shall be payable to an employee on the termination of his employment. When gratuity can be forfeited? So for income tax calculation, Rs. Let us now find out the logic behind requirement of continuous service. In Regional Provident fund Commissioner v. Introduction: Payment of Gratuity Act was enacted with an objective to provide a Scheme for payment of gratuity to employees engaged in factories, mines, oilfields, plantations, ports, railway companies, shops or other establishments and matters connected therewith or incidental thereto.