Avail Benefits Related To Gratuity

The sixth pay commission was implemented by the Govt. to provide benefits to the central government officials or employees. The employees get great benefits due to this initiative of the government. Similarly, another initiative was taken by Govt. that led to the increase in limit for the private sector employees. This decision of government is also helping the private sector employees. Hence, the following are some key points that should be kept in mind before opting for this decision:

Always ask for higher basic salary while negotiating for a new job. This provides more benefits, if the person is planning to stay with the company for a long-term. Asking for higher basic salary will also help you in accumulating better gratuity which is also referred to as accrued benefit.

The money that is deducted from the employees salary (who wants to change his/her job) under the gratuity head is expected to lose.
Tax experts say that in India many employers keep the basic pay low. To handle this type of case, the employee should keep track of their basic salary. The employee should ask his/her employer to raise the basic salary to 40-50% level, in case, if the basic salary as a percentage of the overall salary is low. There is scope for such kind of negotiations in small scale firms or companies.
The employees must know that how to calculate gratuity. There is a method to calculate gratuity that includes multiplication of Current Basic Salary by the number of years and the result is further multiplied by 15/26.

Lets illustrate it by an example. If an employee has resigned, who has a basic salary of Rs. 30,000 and worked four years with the company, then his gratuity amount calculates to Rs. 69,231approximately. The taxpayer should add the excess amount to his or her income to calculate the tax liability.
In the coming time, if an employee invests the amount in an annuity plan. Then, that employee will be able to save tax on gratuity. This provision is made by the draft of the Direct tax Code. It was implemented on 1st of April this year.
If any organization or company has more than 10 employees, then according to the Payment Of Gratuity Act implemented in 1972, that organizations has to make provisions for Gratuity Payouts. An employer delivers this gratuity payment to the employers at the time of resignation, retirement, disablement or unfortunate death (Caused by an accident or a disease).

The manufacturing companies in the private sector have very low Churn Rates for employees as compared to the other private sector companies. Except private sector, the other sectors have very high Attrition Rates.
Experts say that the private sector employees do not give much importance to Gratuity because mostly, they work in a company for lesser time as compared to the government employees. Todays young generation expects salary-in-hand and often neglects benefits like Gratuity that provides long-term benefit.
The eligibility of an employee to get the gratuity amount includes that an employee must work for minimum of 5 years with a company, according to the Payment Of Gratuity Act,1972. However, many organizations have raised this limit according to their organizations rules or criteria.