The blog covers all that you need to know regarding gratuity payments after resigning from an organisation. Read on How to Claim Gratuity After Resignation.
Let us understand what is gratuity and how to claim gratuity after resignation. Under the Payment of Gratuity Act of 1972, gratuity benefits received by an individual against their service are applicable after the resignation or retirement of an individual. Depending on the terms and conditions, the amount can be paid to the employee beforehand. The individual must have completed five years in an organization to benefit from gratuity.
The Act of Gratuity or gratuity compensation is a monetary grant provided to an individual who has terminated their employment with a company. It varies in the legal industry depending on the state. Gratuity is part of an individual’s salary. We can explain it further as the total amount of money paid to an employee by an organization at the end of their employment term. It is an acknowledgment or appreciation of an employee for the services they have delivered to the organization.
There are certain things to keep in mind for claiming gratuity after resignation from an organization. Claim Gratuity is a simple process as it does not involve any external or third-party organization. An employer is bound to pay an employee the gratuity amount after resignation. Gratuity helps an employee in many ways and it is still one of the best retirement benefits for an employee. As per the Gratuity Act of 1972, every organization with 10 or more 10 employees is liable to pay gratuity to each employee.
Rules and Regulations to Claim Gratuity After Resignation
There are cases where an employer pays an employee from their own pockets and others where there is a tie-up with insurance companies for bulk Claim Gratuity. In addition to that, an employee can make a payment to his gratuity payment. The insurance company pays a gratuity amount which is dependent on the clauses attached to the insurance schemes.
Some rules need to be held during the time of payment. The rules state that when an employee is eligible to get gratuity, they need to apply for it within 30 days. An employer is not allowed to cancel an application after its expiry date provided that the delay caused is a valid one. The rules also state that a Claim Gratuity cannot be called invalid if the employee has not filed for it during the period.
Eligibility to Claim Gratuity After Resignation:
The following are the criteria for claiming gratuity by an employee from an employer or organization:
- The individual has to be eligible for a retirement fund
- The individual/employee should be a retired person
- The employee/individual must have completed five years of full employment in the organization
- The individual/employee has come down with some unavoidable disease or has died due to an illness or accident while in service.
Points to Consider
- Gratuity is a kind of tip and an employer can choose to pay the amount, but it should not exceed ₹10lakhs
- Gratuity more than the above-mentioned amount is considered ex-gratia which is not enforced by law and is also considered a charity amount;
- Employment of more than 6 months in an organization is rounded up. Whereas, employment for 6 years and 8 months in an organization enables an individual to have 7 years of gratuity amount. At the same time, if the number of years remains the same but the month has reduced below 6, then the gratuity amount will be rounded off to the number of years excluding the months.
There are many gratuity calculator tools available on the internet to calculate the exact amount received from an organization.
Gratuity Forms Based on Eligibility Criteria
| Form | Function |
| A | Opening of gratuity |
| B | Change of gratuity |
| C | Closure of gratuity |
| D | Not mentioning a family member |
| E | Withdrawal of notice for not mentioning a family member |
| F | Nomination |
| G | Current/Fresh nomination |
| H | Change/Modification of nomination |
| I | Gratuity application by an employee |
| J | Gratuity application by a nominee |
| K | Gratuity application by an heir |
| L | Gratuity payment |
| M | Rejecting the Claim Gratuity |
| N | Direction application |
| O | Hearing notice by the authority |
| P | Summons |
| Q | Application particulars under section 7 |
| R | Payment of gratuity |
| S | Gratuity payment by authority |
| T | Gratuity recovery |
| U | Act and Rules abstract |
Important Rules and Regulations
- Penalty: An employer of an organization can surrender a gratuity according to The Payment of Gratuity Act of 1972. The process can be partial or complete depending upon the employment period in an organization. This usually happens if an employer terminates an employee based on certain criteria.
- Timeline – Payment: There are three main steps to be followed:
-
- The employee must apply and send the application for gratuity to the employer;
- Once the application is received, it is acknowledged and the amount of gratuity is calculated for further procedures; and
- The employer pays the gratuity within a time frame of 30 days after disbursement of acknowledgment.
- Taxation: Over the past years, there have been certain changes in the gratuity payment according to the budget by the central government, like the following:
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- Gratuity received by government employees as per Article 10(10)i; are excluded from paying taxes;
- Retirement and death gratuity under Article 10(10)ii, certain tax to be paid to the government.
To Know the Status of Claim Gratuity
There are two ways to calculate or check the Claim Gratuity:
- Check with the IT Department: One can visit the website of the Income Tax Department and search for gratuity options under Tax Tools.
- Check with the Organisation: The HR of any organization has or must have all the relevant information about an employee’s working timeline. HR can be the best option to know about gratuity status or amounts.
The Process To Claim Gratuity
The Claim Gratuity process commences with an eligible employee formally requesting gratuity. This requires you to apply Form I directly to the employer. In instances where the employee is unable to submit the form personally, their nominee or legal heir can act on their behalf.
Upon receiving the application, it becomes the employer’s responsibility to meticulously verify the claim. This involves promptly acknowledging the receipt of the application and subsequently computing the gratuity amount owed to the employee. The calculation should be conducted promptly to ensure timely disbursement and prevent any unnecessary delays.
Necessary Documentation
To claim gratuity, employees or their designated recipients must submit the following:
- A completed application form (Form I for employees, Form J or Form K for nominees/legal heirs).
- A copy of the employee’s service certificate or proof of employment.
- Evidence of the final salary received.
- A death certificate if the employee has passed away.
Dispute Resolution
If there’s a disagreement over the gratuity amount or the employee’s eligibility, the issue can be brought to the attention of the regulatory authority as per the Act. The employee can file Form N with the relevant regional authority for resolution.
Appeal Process
If either party is unhappy with the ruling of the regulatory authority, they have the option to appeal within 60 days of the decision. The appeal should be directed to the relevant appellate authority.
FAQs:
What is the limit of receiving the gratuity?
₹10 lakhs is the highest limit for receiving a gratuity. An organization will not pay anyone more than the amount even if the employment period exceeds the required years. 10 lakh is described as the highest limit throughout a working timeline. A company/organization can pay anyone more than the mentioned sum not as a gratuity but as a bonus or ex-gratia.
Whom can I nominate to receive my gratuity if I die?
One can nominate anyone to receive the gratuity payment in case of the death of the actual employee, provided the employee has filled up Form F while joining the organization.
How long does it take to get the gratuity money?
One can generally receive the gratuity money soon after or before settling the final employment by filing an application. As per the government rule, an employer is bound to pay an employee gratuity within 30 days. If there is a delay, the employee can take the case up to a higher authority.
I have not completed my whole 5 years of employment, will I receive gratuity?
No, one needs to complete a full 5 years of employment to receive gratuity.
I work as a freelancer. If I resign after 5 years, will I get my gratuity?
One can only receive their gratuity if they are on the company’s payroll, otherwise not eligible.
