I have completed five years of service in my company and am about to resign. Am I entitled to gratuity and how much will I get?

Detailed Legal Analysis

Yes, you are entitled to gratuity after completing five years of service in your company under the Payment of Gratuity Act, 1972.

The Payment of Gratuity Act, 1972 governs the payment of gratuity to employees in India. Since you have completed five years of continuous service, you qualify for gratuity upon resignation. Here are the key points you need to know regarding your entitlement and how the gratuity amount is calculated:

• Eligibility:
  • Employees who have completed a minimum of five years of continuous service are eligible for gratuity.
  • This includes employees in factories, mines, oilfields, plantations, ports, railway companies, and other establishments as specified under the Act.
• Calculation of Gratuity Amount:
  • The formula for calculating gratuity is: Gratuity = (Last drawn salary × 15/26) × Number of completed years of service
  • Last drawn salary includes basic pay and dearness allowance (DA).
  • For the calculation, the number of days in a month is considered as 26 working days.
• Gratuity Limit:
  • As per the Act, the maximum gratuity payable is capped at ₹20 lakh (this limit may change, so it’s advisable to verify current limits).
• Application Process:
  • You need to submit a formal application for gratuity to your employer after resigning.
  • Your employer is required to process the application and pay the gratuity amount within 30 days of receiving the application.
  • If the employer fails to pay gratuity, you may approach the controlling authority under the Act for remedy.
• Tax Implications:
  • Gratuity is tax-free up to ₹20 lakh under Section 10(10) of the Income Tax Act, 1961, for employees covered under the Payment of Gratuity Act.

In summary, upon your resignation after five years, you are entitled to gratuity, and the amount will be calculated based on the formula provided under the Payment of Gratuity Act, 1972. It is advisable to maintain communication with your employer to ensure a smooth application process.