Government or private sector employees: Know how gratuity is calculated to avoid being cheated

Gratuity is a one-time payment from a workplace or organization given by employers to express gratitude for their employees' continuous service.

Gratuity rules were made mandatory under the Payment of Gratuity Act, 1972. The act was passed by Parliament on August 21, 1972, and came into effect on September 16 of the same year.

This law has been made mandatory to include all central and state government departments, defense, and local administrative bodies. Private establishments can also come under its purview subject to fulfilling certain conditions.

1. Gratuity is payable if an organization employs 10 or more employees – Organizations that have employed 10 employees in a single day in the last 12 months have to pay gratuity. Even if the number of employees in the same establishment falls below 10, gratuity has to be paid as per the rules of the law.

2. Gratuity is not only payable upon retirement – Under India's gratuity rules, an employee will be eligible for gratuity in the following circumstances: Retirement, Resignation, Death, Death by accident, VRS, Termination, Layoff

Tax exemption has been granted under the Gratuity Rules 2021. Earlier this limit was fixed at Rs 10 lakh.