Private sector employees often have confusion about gratuity. Actually, people think that it is available only after 5 years of service, but in some special situations, gratuity can be received even for less than 5 years of service. So there are different rules for this, which are important to know.

Gratuity Calculation: Private job holders often have questions and confusion about gratuity. It seems in the mind that gratuity is available only after 5 years? Actually, usually gratuity is paid only after 5 years of continuous service, but in some special circumstances this timing is not necessary. For example, if an employee dies or becomes permanently disabled, then the amount of gratuity can be given to him or his dependents even before 5 years. So this is the reason why it is important that every employee has the correct information about the rules related to gratuity.

Gratuity is considered a kind of thanks or reward, which an employer gives to his employee for working continuously in the company for a long period. It is a lump sum payment. It also comes under the 'Payment of Gratuity Act, 1972', which has been made with the aim of giving financial security to all employees at the time of retirement. It is not a part of the salary of any employee, but is an extra benefit.

Actually, according to its Act, the first and most important condition for getting gratuity is that the employee has worked continuously for at least 5 years in the same company. This rule applies to getting gratuity after retirement, resignation or leaving the job. So if any employee leaves the job before 5 years, then he generally cannot be entitled to gratuity.

Although most people think that it is necessary to work for at least 5 years to get gratuity, but this is not always true. Because at some special times this rule does not apply. So if an employee dies during service, then gratuity can be paid to his nominee regardless of the service period. Similarly, if someone becomes permanently disabled due to an accident or serious illness while working, then he can also have full right to get gratuity.

'5 years of continuous service' has been clarified in the 'Payment of Gratuity Act, 1972'. If an employee has worked for 240 days or more in the last year, he will be considered 'full year' for that year. That is, for example, if an employee has worked for 4 years and 240 days, he will be considered to have completed 5 years of service for calculating gratuity.

If you want to know how much gratuity you will get on leaving the job, then its simple formula is: (Last salary × 15 / 26) × years of service. Last salary includes your basic salary and dearness allowance (DA). According to the Gratuity Act, the calculation is done on the basis of 15 days' salary, assuming 26 working days in a month. For example, if your last salary is ₹ 35,000 and you have worked for 7 years, then you can get ₹ 1,41,346. In this, a maximum of ₹ 20 lakh gratuity can be available tax free.

The rule related to tax on gratuity depends on the type of employee and it is important for every working person to know it. So if you are a government employee, then the entire gratuity amount you get is tax free, and for employees working in the private sector, there is no tax on gratuity amount up to ₹ 20 lakh. (Note- The news is based on general information, consult an expert for more information on gratuity)