New Rules For Tax-Free Gratuity Payment Bill 2017


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Gratuity is one of the defined benefit plan provided by the employer to the employee for catering services continuously for 5 years or more. It is one of the monetary benefit generally offered at the time of retirement / superannuation.

Some certain rules that have an employee entitled to get gratuity before the age of retirement or super annuation.

As per the Payment of Gratuity Act, 1972, a worker is eligible to avail gratuity amount if he/she has given continuous service for the minimum of five years with a company. The gratuity generally is payable to the worker up on his/her superannuation or retirement or resignation

But still, there lies an exception where the terms of working constantly for five years with an establishment is not applicable.

If the worker’s services are terminated because of his death or has become physically challenged untoward accident or a disease, an employer is compulsory by law to remit gratuity to him or his nominee/legal heir, as the case maybe, whether the number of periods of continuous service.

The law also claims that in case the employee’s nominee is a minor, then the ALO / Assistant labour commissioner shall deposit the money in his name in a term deposit with the SBI or a nationalised bank for the minor’s purpose until he/she turns a major.

The terms advices that once a staff go eligible to obtain gratuity, he/she can submit application within thirty days from the date it entitles payable. And if the retirement date or superannuation is exhibited, then also, the application can be 30 days early.

There is no clause where an employer cannot avoid an application by the employee upon the expiry of 30 days, if the delay caused because of a valid reason. The rules further state that no claim for gratuity is considered invalid just because the claimant has not submitted his application within the mentioned period.

The worker is instructed to mention the amount payable and indicate the date of payment within fifteen days of receipt of application. The remittance should be done within thirty days from the date of receipt of application.

In case worker cancels the application of a worker for the remittance of gratuity, he/she will be needed to give the cause for cancellation.



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