7th pay commission: who is entitled to tips? Check your eligibility, calculations based on salary
7th Pay Commission: As per the Gratuity Payment Act 1972, the maximum gratuity an employee can receive is Rs 20 lakh; the full amount is given by the company/organization from its own resources.
7th Pay Commission: In a major relief to many millions of employees and pensioners across the country, the central government earlier this week increased the dearness allowance (DA) and dearness allowance (DR) by four percent, while also increasing the housing allowance (HRA) for central government employees who in the cities of categories X, Y and Z.
The Center has also increased the tax exemption limit on gratuities from Rs 20 lakh to Rs 25 lakh for central government employees.
The amount of gratuity and subsequently the tax on it may vary for central government employees in different pay scales, making it very important to know the new tax limits on gratuities as well as the total amount of gratuity one can expect to receive at the time he or she is received. her pension.
Here’s how we can calculate the gratuity amount you will receive in retirement by calculating the amount on a standard basic salary of Rs 15,000.
Who and when is someone entitled to a tip?
All employees of a company with more than ten employees are entitled to gratuity under the Payment of Gratuity Act, 1972. As per the current rules, a service class employee is eligible for gratuity after working in the same company for five years. However, the Center may soon change this rule in the New Wage Act, under which an employee can receive gratuity after just one year of service instead of five years.
Notably, gratuity is given only at the time of retirement or if and when one leaves the job, even though, as per the prevailing rules, an employee is eligible for gratuity after completing five years of service.
If someone dies during employment or quits the job due to an accident, the nominee will receive the gratuity amount.
Who is not eligible for tips?
As per the current law, any employee who has not worked at the same company for at least five years or left the job before the said period is not eligible for gratuity.
Even if a person leaves after 4 years and 11 months from the date of employment, he or she is not eligible for gratuity. However, this rule can be relaxed if the employee dies or has to leave the job due to an accident.
How much tip can you get?
As per the Gratuity Payment Act 1972, the maximum gratuity an employee can receive is Rs 20 lakh; the full amount is given by the company/organization from its own resources. What is different in this case is provident fund (PF), to which the employee also contributes 12 percent of his salary.
How is the tip calculated according to the Tip Payment Act?
Under the Gratuity Payment Act 1972, gratuity is calculated for employees, divided into two categories; those within the scope of the law and those outside it. Both private and public sector employees fall into these two categories.
How do you calculate the tip for employees covered by the law?
For employees who fall within the scope of the law, gratuity is calculated using the following formula;
Last salary x seniority x 15/26
Final salary = Basic salary + animal allowance + commission on sales (if applicable).
According to the formula, the employee is paid in an average period of 15 days, based on 26 working days in a month.
If we take the example of an employee who has worked in a company for six years at a basic salary of Rs 15,000 per month, his gratuity is calculated as 15,000 x 6 x 15/26 = Rs 51,923.
Particularly during the last year of employment, six months of employment are considered a full year.
How do you calculate the tip for employees who are NOT covered by the law?
For employees who do not fall within the scope of the Tip Act, the tip is calculated using this formula; Last salary x seniority x 15/30 in which Final salary equals basic salary + animal allowance + commission on sales (if applicable).
In this case, unlike the first case, only a full year of service is taken into account in the last year of service.
Let us again calculate the gratuity amount for an employee who has worked in a company for six years at a basic salary of Rs 15,000 per month. As such they will receive 15,000 x 6 x 15/30 = Rs, 45,000 as total tip amount.