Salary consists of so many components like Basic, DA, HRA, Bonus, Commission, Allowances and Perquisites. But while calculating Gratuity, HRA, EPF and value of perquisites for rent free/concessional house we need to consider only few components of salary. So let us look into detail about those considerations.
1) Salary definition for Gratuity–
A) Gratuity covered under Payment of Gratuity Act 1972-For this purpose salary means only Basic salary and Dearness Allowance (DA). No other salary components will not be considered for calculaiton.
B) Gratuity not covered under Payment of Gratuity Act 1972-For this purpose salary means Basic salary, Dearness Allowance (DA) and Commission (if paid as a % of turnover).
Remember while considering salary in the case of (B) Gratuity not covered under Payment of Gratuity Act 1972 DA need to be considered only if it is forming part of retirement benefit otherwise not to consider. Also Commission should be in the form of % of turnover not lump sum payment.
2) Salary definition for House Rent Allowance (HRA)-For calculation of House Rent Allowance (HRA) you need to consider Basic Salary, Dearness Allowance(DA) and Commission (if paid as % of turnover).
Again in this case too DA need to be considered if it is forming part of retirement benefit otherwise not to consider and Commission also need to % of turnover.
3) Salary definition for Employee Provident Fund (EPF)– For calculation of salary components under employer’s contribution towards recognized provident fund too we need to consider the same salary components of HRA i,e Basic Salary, Dearness Allowance(DA) and Commission (if paid as % of turnover). Also the above said conditions of considering DA and Commission too will apply here also.
Click here to see updated meaning of salary for calculation of EPF contribution.
4) Salary definition for Leave Encashment-In this case also you need to consider the same salary components as you considered for HRA and EPF.
5) Salary definition for rent-free/concessional house perquisite valuation-Below salary components are considered while calculating the valuation of perquisite.
a) Basic Salary;
b) Dearness Allowance (if terms of employment so provides);
c) Bonus;
d) Commission;
e) fees;
f) All taxable allowances (excluding amount not taxable); and
g) any monetary payment which is chargeabble to tax (by whatever name called).
But it does not include-DA if not considered for retirement benefits, employer’s contribution to provident fund account of an employee, all allowances which are exempt from tax, any lumpsum amount received like Gratuity, Leave Encashment, VRS or Commutation of Pension and value of perquisites (under section 17 (2)).
Hope I simplified the Salary definition for the calculation of above facilities.
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Is there any judgement when there is a dispute on gratuity without salary slip
Dear Dilip,
I am not a lawyer and hence unaware of judgments.
I have resigned from a Pvt. Ltd company after 16.3 yrs. My company does not have DA in salary structure but apart from HRA & PF, it puts upto 84% of Basic as Transport Allowance (less any amount opted for Non-Taxable Benefit like Sodexo Meal Coupons, Fuel & Chauffeur Allowance, Telephone Allowance, Child Education Allowance). Hence Shouldn't this Transport Allowance Not be considered at par with DA for Cost of Living Allowance and be counted for Gratuity calculations?
Dear Ashish,
Sadly NO.
Hello sir, I've joined my (Pvt. Ltd.) organisation on 25/oOt/2017 and my reliveing date is 09/June/2022.
Am I eligible for gratuity?
If no then why? please suggest me how can I avail for gratuity!!
Thanks in advance.
Dear Mohit,
Yes, you are eligible.
I have joined on 01/06/2017 and working till now 05/04/2022 am I eligible for gratuity.
Work period
01/06/2017
To 05/04/2022
Dear Gvvn,
Yes.
Hello sir,
Need to know how the basic is calculated on net salary Rs. 25000/-. I left my previous job in 2016. I worked for 5.5years in the same company. How much Gratuity should I get? Please let me know.
Thank you
Dear Archana,
Please calculate using the formula. Refer my latest post for the same "Gratuity – New Limit, Eligibility, Formula, Taxation and Calculator".
Dear sir
I am completed 4 years 8 months.now I am desided to resign my job. Am I eligible for gratuity. Now my basic salary is 20 k . If compeny depramoted my basic salary is 15k. Which on is considered sir
Dear Suresh,
Yes, you are eligible. Check the above formula for calculation.
Sir Graduity calculation if package is Basic., HRA and Special allowances in payslip which are all considered and for the period sept 14 to aug 19 whether graduity will come please clarify sir
Sir I’ve worked in one of the institution for 2 years 8 months ( 18 AGUST 2017 to 30 th APRIL 2020)
Am I eligible for Gratuity ? YES OR NO
Dear Naresh,
NO.
Dear Sir, Our Company compulsorily pays us leave salary on March 31st each year. Should such encashment of leave salary form part for salary for the purpose of calculating Exempt HRA. Reasons for this doubt (1) Leave salary is neither an allowance nor a perquisite but part of salary (2) It is compulsorily encashed and paid to us us each year ; can not be carried forward and hence can not lapse ; hence there is certainty of payment unless of course if we do avail of all leaves. (3) however since Leave salary rules can be different for different organisations and payable only in case the employee has not taken any leave then it does appear like a perquisite and should not form part of Salary for calculating HRA. Your views please
Dear Sanjay,
As per me, it should be part of salary.
how to the private concern has decieded to give the every monthly salary has converted to 26days related of graduty rule
Dear Selvi,
It is the rule and as per that they have to follow.