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sandeep   17 January 2018

Confusion over gratuity eligibility period


I have the confusion over Gratuity eligibility period.

Somewhere it is 4.8 years whereas at some place it is mentioned as 5 years.

This caused the confusion specific to my case.

I joined the company on August-7-2013, and need to know by what term/month(and day) i shall be eligible for it?

Do i need to complete full 5 years i.e. August-7-2018?Also, is it taxable?


Thank you for the help.


 9 Replies

R.Ramachandran (Advocate)     17 January 2018

According to Section 4(2) of the Payment of Gratuity Act, 1972, For every completed year of service or part thereof in excess of six months, the employer is liable to pay gratuity to the employee at the rate of fifteen days wages based on the rate of wages last drawn by the employee.

Thus, it is not that an employee has to complete 5 years service to be eligible to get the gratuity.  Even if an employee puts in less than 5 years service, but more than   4 years and 6 months, he will be eligible for gratuity.  That's how an employee who, in your example has put in 4.8 years of service becomes eligible for payment of gratuity.

At present payment of gratuity upto Rs. 10 lakhs is exempted from income tax.


sandeep   17 January 2018

Thanks Mr Ramachandran.

I believe 4 years and 8 months of employment period also includes the notice period to be eligible for the gratuity payment.

Kumar Doab (FIN)     17 January 2018

Would you post from which publication or thread at which portal or link you have felt confused?

Kumar Doab (FIN)     17 January 2018


What is this establishment; Private, Govt…………….

Which Gratuity Rules apply to IT?

The establishment works for how many days/week; 6 or less than 6?

Attach the rules and/or link…..


GO thru;




If the Act applies to the establishment then the ACT does not discriminate between class of employees be IT ‘Workman’ or ‘Non Workman’…… and thee I NO wage ceiling!

IN other words all employees despite their wages al covered and are eligible subject to provisions of the Act.

Kumar Doab (FIN)     17 January 2018

If the establishment works for 6 days/week; then employee should have worked for 240days/year and in last year or 4Y240D

If the establishment works for less than 6 days/week; then employee should have worked for 190days/year and in last year or 4Y190D

Calculate from date of reference i.e; LWD to DOJ.

Notice period served, off days, are all counted in service period.


IT is simple.

Generically speaking as on date you have worked for 04Y05M10D…

Kumar Doab (FIN)     17 January 2018

I am sending you a few links and you may pick up the relevant points…

Employee should take help of elders of the family, competent and experienced well wishers, seasoned employees/trade union leaders, a very able senior LOCAL counsel of unshakable repute and integrity specializing in Labor/Service matter and having successful track record…and become properly informed.


Kumar Doab (FIN)     17 January 2018

After completion of 5 Calender years if employee has worked for;

>6months count as =1Y for the purpose of calculation of Gratuity.

<6months count as =0Y for the purpose of calculation of Gratuity.

Formulae for Calculation of  Gratuity= { ( Basic+DA)/26*15* NO. of Years in service)}

Basic +DA per last drawn wages


Swathi Pola   06 February 2023

As per my research, An employee must complete 5 years to be eligible for gratuity according to the Payment of Gratuity Act 1972. The government has not yet passed any policy stating that an employee is eligible for 4 years and above. The gratuity amount is exempt from tax only for government employees, and a gratuity amount of only 10 lakhs for private employees is exempt from tax.

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