Payment of Gratuity Act
An act to provide for a scheme for the payment of gratuity to employees engaged in factories, mines, oilfields, ports, plantations, shops or other establishments and for matters connected therewith or incidental thereto.
Applicability
- Every factory, mine, oilfield, plantation, port and railway company
- Every shop or establishment within the meaning of any law for the time being in force in relation to shops and establishments in a state, in which 10 or more persons are employed, or were employed, or any day of the preceding 12 months.
- Such other establishments or class of establishments, in which 10 or more employees are employed, on any day of the preceding 12 months, as the central government may, by notification, specify on this behalf.
- A person is eligible to receive gratuity only if he has completed minimum five years of service with an organization. However, it can be paid before the completion of five years at the death of an employee or if he has become disabled due to accident or disease.
- Gratuity payable is based on the 15 days of last drawn salary (Basic + DA) for each completed year of service or part of thereof in excess of six months.
- The maximum gratuity amount that is tax exempt is applicable to a person's entire career. What this means is that during employee’s entire working life, the tax-exempted gratuity amount he/she can claim cannot exceed Rs 20 lakh currently in total from one or more employers.