Gratuity law in India

Gratuity law in India is governed by The Payment of Gratuity Act, 1972. Gratuity is a lump sum payment made to an employee on (a) resignation (b) termination on account of death or disablement due to accident or disease (c) retirement (d) death. Gratuity is a form of social security payable only after an employee completes five years of continuous service at the rate of 15 day’s wages per year of service completed. In case of death and disablement, the condition of minimum 5 years’ service is not applicable. Gratuity Act in India applies to every shop and establishment where 10 or more persons are employed or were employed on any day in the preceding 12 months and is applicable to all employees – workers as well as persons employed in administrative and managerial capacity, irrespective of their salary.

Under Gratuity law in India the amount of Gratuity is calculated as given below;

Gratuity amount = Basic + Dearness Allowance x 15 x No. of years of continuous service.


As per Gratuity Act in India, Wages shall consist of basic plus D.A, as per last drawn salary. However, allowances like bonus, commission, HRA, overtime etc. are not to be considered for calculations. Finally, under Gratuity Act in India, Gratuity payable cannot be attached in execution of any decree or order of any civil, revenue or criminal court, as per Section 13 of the Act.

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