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raj (SRA)     28 December 2011

Eligibility for gratuity


I joined in one organisation on 16-feb-2007 and going to take release on 16-feb-2012. There is no discontinuation in this time period. So am I  eligible for gratuity ?

I need your advise.


 20 Replies

Kumar Doab (FIN)     28 December 2011


VS Dixit (Advocate)     28 December 2011


As per Payment of Gratuity act, Gratuity shall be payable to an employee on separation from employment due to any of the following reasons, after he has rendered continuous service for not less than five years.

a). on his superannuation or b). on his retirement/ resignation or c). on his death or disablement due accident or disease.

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vasant kulkarni (DEPUTY CHIEF EXECUTIVE OFFICER)     29 December 2011


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Shivayogi Sindhur (Assistant Manager(P&A))     29 December 2011

Yes,  you will be eligible by that date. Your Gratuity amount will be calculated as below.

1) If have 6 days working week,( one holiday in a week) then Total Gratuity will be



2)If you have 5 day working week( Two holidays in a week), then




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Manoj kashera (Finance manager)     29 December 2011


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Kumar Doab (FIN)     29 December 2011

Superannuation is a defined contribution plan, is employee's contribution, and Employee can withdraw 1/3 or Superannuation Fund as tax free income and with rest pf 2/3 he has to buy an annuity plan (pension plan), is not a statute, can be withdrawn any time e.g. leaving the company or retiring


Gratuity is a defined benefit plan, is employer's contribution, 100% of the Gratuity amount is Income Tax Free and can be received in one go, is a statute, and can be received only when you complete 5 years of continuous service.

1 Like

Sanjay Khandelwal (Manager Legal)     29 December 2011


As per Gratuity Act the calculation is being done taking month as 26 days irrespective of whether 5 days working or 6 days working.

Will appreciate if could have info on the legal provision/rule/notification if any, specifying the method of calculation by taking month as of 22 days in case of 5 days working.


Best Regards

Sanjay Khandelwal


1 Like

Shivayogi Sindhur (Assistant Manager(P&A))     29 December 2011


2010 edition of A Practical Guide to Labour Laws by CR Rao, published by of Puliani and Puliani B'lore,page no.309 gives an illustration of as follows.

An Employee drawing an agreegate salary of Rs.1350 per month retires after service of 18 yrs. His service during 2 years in this period was not continuous, the number of days served in those years having been less than 240. The establishment conventionally declares holidays on Saturday and Sunday of every week. Gratuity payable will then be:

Agreegate salary X Fifteen days X Number of Eligible years

No. of working days in a month adopted by the establishment

In the Instant case,

Gratuity= Rs.1350X15X16  =Rs.14727.00


Pl elucidate.

Sanjay Khandelwal (Manager Legal)     29 December 2011


Law provides calculation to be done as  (Basic+DA )X No of Years in ServiceX15


I could not locate the 22 days as denominator for 5 days working. Kindly share relevant provisions of law/notification/Ruls

Best Regards



raj (SRA)     29 December 2011

Thank you for your valuable suggestion.

With warm regards,


NAGAPPA B NESUR (PROPRIETOR)     30 December 2011

Hi Sir

Ref: Payment of Gratuity Act, 1972(herein after called as "the Act")

I have worked in an CA firm from 8th September 2006 to 30th June 2011. It is 4 years and 296 days in 5th year of continuous service. There is no break or gap in service during this whole period. I referred the Mettur Beardsell Ltd Vs. Regional Labour Commissioner(central) by Madras High Court, WP No.2135 of 1987 decided on 12.06.1996 (1998 LLR 1072, but the copy available was for final decision and I have not found the copy to refer full facts of the case. Now my queries are:

1.      Whether sub-clause(1) of Sec.2A of the Act is applicable to my case which refers to "continuous service for a period" in this section. Here, how to understand a period, 12 months or 240 days?


2.      Whether sub-clause (2) of Sec. 2A of the Act is applicable to me which says 240 days of continuous service is deemed to be one year of completed service. I have completed service for more than 240 in fifth year, whether it can be considered as 5 completed year of service for Gratuity entitlement ?


 Kindly elucidate and provide any case reference in Karnataka applicable to the above facts.


N. B. Nesur

Kumar Doab (FIN)     30 December 2011

Hope this shall be useful:

Section: 2
(b) “completed year of service” means continuous service for one year;
[2] [(c) "continuous service" means continuous service as defined in section 2A;]

Section 2A itself is defined as below


Section: 2A
Continuous service.
For the purposes of this Act, -

(1) an employee shall be said to be in continuous service  for a period if he has, for that period, been in uninterrupted service,  including service which may be interrupted on account of sickness,
accident, leave, absence from duty without leave….
(2) where an employee (not being an employee employed in a seasonal establishment)  is not in continuous service within the meaning of clause (1), for any period of one year or six months, he shall be deemed  to be in continuous service under the employer -
(a) for the said period of one year, if the employee during the period  of twelve calendar months preceding the date with reference to which calculation is to be made, has actually worked under the employer for not less than -


one hundred and ninety days, in the case of an employee employed below the ground in a mine or in an establishment which works for less than six days in a week; and

(ii) two hundred and forty days, in any other case;

Building on the above definition, the Gratuity Act defines the payment of Gratuity in Section 4

Section: 4

Payment of gratuity.


1) 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,  

Most people referring the Act only refer to Section 4 and infer that a minimum of 5 years of service is required for Gratuity – but if seen in light of the previous DEFINITIONS of  continuous service it is clear the Act implies  that 4 years and 240 days/190 days (depending on the number of days the organization works in a week) is enough to satisfy the requirement of continuous service for not less than five years, as stated in above Section 4 – Payment of Gratuity

Useful links:

Gratuity Act 



Rules of Payment Of Gratuity


Kumar Doab (FIN)     30 December 2011

Pls look into the attachment.

Attached File : 567402443 gratuity case laws.pdf downloaded: 93 times

NAGAPPA B NESUR (PROPRIETOR)     30 December 2011


Thanks for your valuable suggestion/reply.

But, my previous employer is telling me that the Madras High decision is NOT TENABLE here in Bangalore, Karnataka. I understand that the High Court decisions hold good, unless there is a contrary view taken in other case of same grounds by any other High Court in India or there is superseding decision by Supreme Court of India.

Now, Is my previous employer is correct?

If not, Is there any contempt of court or disregard to the court decision/view?


Kindly let me know the difference between Sub-clause(1) and Sub-clause(2) of Sec.2A. Because, our emplyer is telling me that you are covered under Sub-clause(1) of Sec.2A and hence the deeming of 240 days of service as one year is not correct.


Kindly elucidate the same.



N.B Nesur

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