Gratuity Act Compliance

The Payment of Gratuity Act, 1972 is an Indian labor law that requires companies with 10 or more employees to provide a one-time gratuity payment to workers upon retirement or resignation after at least five years of service.

Key Features of the Payment of Gratuity Act, 1972

Applicability

Covers organizations with 10 or more employees across sectors.

Gratuity Calculation

Based on 15 days’ salary for each completed year of service, using the formula: (Last Drawn Salary × 15 × No. of Completed Years of Service) ÷ 26

Tax Benefits

Gratuity is tax-exempt up to ₹20 lakh under Section 10(10) of the Income Tax Act.

Protection for Employees

The Act ensures financial security for employees post-employment and safeguards their rights.

Eligibility

Employees qualify after 5 years of continuous service, except in cases of death or disability.

Payment Process

Must be paid within 30 days of an employee’s resignation, retirement, or termination.

Employer Obligation

Employers are legally required to pay gratuity, and failure to comply may result in penalties.

Documents Required for Gratuity Registration

✅ Business Details: Registration Certificate, PAN Card
✅ Employee Details: Name, DOJ, Designation, Salary
✅ Application Forms: Form A (Registration), Form B (Business Changes)
✅ Compliance & Approval: Labour Dept. approval, payment records
✅ Gratuity Payments: Form I (Claim), Bank Transaction Proof

Step-by-Step Gratuity Registration Process

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