sumitv 21 May 2015

Cap on gratuity

Hi,

2 queries:

1) If employee is deducting Gratuity from committed salary stated in employment offer letter, on transfer to an overseas office after less than 5 years are they liable to pay back employee 's own contribution (possibly less of tax and without any interest)?

2) if as per Gratuity formula the amount payable to an employee on resignation exceeds the cap (earlier Rs 3.5 lakhs and noow 10 lakhs) is only the cap amount payable as per the Act or is the total amount payable with the cap amount tax free and the balance taxable?

Thanks

Sumit

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3 Replies

Kumar Doab (FIN) 21 May 2015

Above Rs.10Lac the payment is subjected to tax treatment.

As per other points raised by you probably you wish to point that:

--- if Gratuity is mentioned in annual/monthly pay package/CTC …………………then would it be payable. Annual/monthly pay package/CTC…..is as observed by you a committement to pay hence it shuld be paid. The employees that persist succeed.

---If employee is sent aboad then is Gratuity payable! There can be various factors that should be looked into e.g. Was employee sent abroad by deputation/transfer order……………………………..Was salary being processed in India………………..Was employee provided with any social security abroad in lieu of Gratuity in India etc?

There are many threads on similar query that you may find relevant at:

https://www.lawyersclubindia.com/forum/display.asp?cat_id=9&forum_id=49

On the same page you can also punch key words in box on right hand side titled ‘SEARCH TOPICS & POSTS’ and press ‘GO’……………….

It shall be appropriate to show the employment related documents e.g. appointment letter,HR policy/Service Rules and regulations etc mentioned in appointment letter/salary slips/Form16/deputation-transfer order/all communications exchanged before and after deputation-transfer/any contract signed for assignment abroad etc ………………..to an able labor law consultant/service matters lawyer/law firm in person and spend quality time with your counsel,to understand merits and remedies before you proceed further……

The generic answers won't be of much use.

darshana sawant (associate consultant) 22 May 2015

Dear Sumit,

If the gratuity amount exceeds 10 lakhs then, as per the PGA only 10 lakhs are payable because that is the prescribed ceiling.as per section 4(3) of the Act, provided he was employed by Indian law and PGA is applicable to the employee.

Kumar Doab (FIN) 22 May 2015

Employees within the coverage of the Act..........(Payment of Gratuity Act, 1972) or otherwise if being provided by their organization for the same are entitled to receive gratuity............

The employees may receive gratuity at a higher rate than prescribed under the Act.....{Sec. 4(5) }...............through any award or agreement or contract with the employer..........

SAIL Ex-Employee’s Association vs. Steel Authority of India & Another has also granted legal sanction to agreements to this effect.

https://delhicourts.nic.in/Aug09/SAIL%20-%20EX%20EMPLOYEES%20ASSOCIATION%20VS.%20SAIL.pdf

You may apply your own skills of negotiation,reasoning,persuasion,persistence or rely upon your employe's unions/Trade Unions leaders or your labor law consultant/service matters lawyer/law firm.............