How to Claim Gratuity After Resigning

Gratuity is an important financial benefit provided by the government to recognize employees for their long-term service. Governed by the Payment of Gratuity Act, 1972, it is a monetary reward given when an employee retires or resigns, provided they meet certain eligibility criteria.

Gratuity is not always paid directly by the employer. In some cases, organisations use group insurance schemes through insurance companies to manage gratuity payments. This approach offers extra security, especially for larger companies where gratuity amounts can be significant.

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• Submit Form I to formally initiate your gratuity claim after your resignation.
• Employers must acknowledge receipt and calculate gratuity based on salary and service.
• Gratuity must be disbursed within 30 days; delays may incur interest payments.
• Valid reasons for delayed gratuity applications prevent employers from rejecting claims.

Claiming gratuity is a simple process. But you need to handle it correctly to ensure timely disbursement. Here is a step-by-step guide that will explain to you how to claim gratuity after you retire:

1. Start the claim: To start the process, you have to submit a formal application using Form I (if you are eligible for gratuity). If you cannot do this personally, your nominee or a legal heir can submit the form on your behalf.
2. Employer’s acknowledgement: Once the employer receives your gratuity application, they will have to acknowledge it and calculate the gratuity payable to you.
3. Gratuity calculation: The calculation will be based on your last drawn salary and years of service. The calculation formula is explained below. The calculation must comply with the provisions of the Gratuity Act.
4. Disbursement of gratuity: After the calculation, the employer will have to disburse the gratuity in 30 days. If there is a delay, an interest could be added to your gratuity amount from the due date until they make the payment.

By following these steps, you can ensure that your gratuity is processed efficiently.

Several rules apply to the process of claiming gratuity. These rules ensure fairness for both employers and employees. Some of these rules are:

• Gratuity claim period: Employees must apply for gratuity within 30 days of becoming eligible. However, if you provide a valid reason for the delay, your employer cannot reject the application because of late submission.
• Employer responsibility: Once you submit the claim, the employer should respond promptly and initiate the payment process after calculation. Failure to adhere to the prescribed timelines may lead to penalties for them.
• Insurance-backed gratuity: In certain cases, employers work with insurers to pay gratuity. In such cases, insurance companies will handle the payout according to the applicable clauses.

Not every employee is automatically eligible to claim gratuity. The following conditions must be met to qualify you for gratuity:

1. Minimum years of service: You must have completed a minimum of five years of service continuously with a company or organisation. But in cases of death or permanent disability, this condition does not apply.
2. Retirement or resignation: Gratuity is generally payable at the time of retirement or voluntary resignation. The five-year service rule must be satisfied, however.
3. Retirement fund eligibility: To receive the gratuity, you should be eligible to receive a retirement fund.
4. Special circumstances: If an employee dies during their service or is incapacitated due to some kind of illness or injury, the gratuity is payable to the nominee or a legal heir, and the five-year requirement does not apply.

These criteria are a way to ensure that only those who have committed to long-term service can benefit from the provision.

Also Read : Gratuity Nomination

Many other rules and regulations also apply to the payment and amount of gratuity. Some of the main ones include:

• Gratuity amount cap: The maximum gratuity payable under the Gratuity Act is Rs. 10 lakh. Any amount over this limit might be offered as ex-gratia, but it is not legally mandatory.
• Rounding of service years: Employment duration is rounded to the nearest year when gratuity is calculated. For example, if you have worked for six years and eight months, you are considered to have completed seven years. But, if the employment duration is six years and four months, it will be rounded down to six years.
• Gratuity calculation formula: The basic formula for calculating gratuity is:

Gratuity= ((Last Salary Drawn×15​)/26) ×Years of Service
The last drawn salary includes your basic pay and dearness allowance, if it was applicable.

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Gratuity is a key benefit that serves as financial security for you after you resign or retire. The process of claiming gratuity is straightforward, but understanding the rules, eligibility criteria, and calculation methods is essential to ensure that everything goes smoothly. Employees must apply promptly and provide the necessary documentation to avoid delays in payment.

By knowing how to claim gratuity after resigning and staying informed about the regulations, you can safeguard your rights and secure your gratuity payments in a timely fashion.