5 smart things to know about gratuity

Gratuity paid to government employees is exempt from tax and the tax-free limit for private employees is Rs 20 lakh.

5 smart things to know about gratuity
1. Gratuity is a payment that an employer makes to the employee either at retirement or when he leaves the company after continuously working for five years or more.

2. As per Payment of Gratuity Act, 1972, companies with more than 10 employees working in factories, mines, oilfields, plantations, ports, railway companies, shops or other related establishments need to pay gratuity.

3. Gratuity is calculated as 15 days’ last drawn wages multiplied by the number of years of service completed.

4. Gratuity paid to government employees is exempt from tax and the tax-free limit for private employees is Rs 20 lakh.

5. The gratuity amount is paid by the employer unlike the case of the provident fund where the employee too contributes.


(The content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.)
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)
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