INTRODUCTION

Gratuity-- Gratuity refers to the emoluments received by an employee

from his employer in gratitude for the services rendered. ESIC -- An Act to provide for certain benefits to employees in case of

sickness, maternity and employment injury

Gratuity is an amount given to employees by employer when they leave the job after completing five years or minimum 240 days per year or after retirement. The number of year may differ from company to company

Gratuity is payable under the payment of wages act.

Gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than five years.

(a) on his superannuation, or (b) on his retirement or resignation, or

(c) on his death or disablement due to accident or disease

Gratuity is calculated as Basic + DA divided by 26 * No of years of service *15.

Note: Last basic drawn will be considered

GRATUITY

TAXABILITY OF GRATUITY

Gratuity received by an employee is taxable as salaries. The Income tax Act segregates the employees receiving gratuity on the following basis:

Government employees

Non – Government employee covered under the Gratuity Act.

Non – Government employee and not covered under the Gratuity

Act.

Exemption available for employees covered under the Gratuity Act:

In case of employees covered under the Gratuity Act, exemption is limited to the extent of minimum of the following:

Gratuity actually received

TAXABILITY OF GRATUITY(CONTD.)

15 days salary for every completed year of service or part thereof (i.e. services in excess of 6 months will be treated as full year service)

Rs 3,50,000 (the maximum limit as provided in the Gratuity Act)

All the employees in the factories or establishments to which the Act applies shall be insured under this Act

The contribution comprise of employer’s contribution and employee’s contribution at a specified rate

Contribution rate : 1.75% - employees 4.75% -employers

The ceiling 15,000/- gross salary. After reaching the ceiling one will be exempted. (with effect from 1.05.2010)

Two contribution periods each of six months: 1st April to 30th Sept

1st Oct. to 31st March

Employees State Insurance Act

Employees State Insurance Act(Contd)

Two corresponding benefit periods of six month1st January to 30th June 1st July to 31st December

Benefits:

Medical Benefit Sickness Benefit Maternity Benefit Disablement Benefit Funeral Expenses

For more information, please visit : http://esic.nic.in/benefits.htm

Thank You