Gratuity is a part of salary that is received by an employee from his/her employer in Gratitude for the services offered by the employee in the company. Gratuity is a voluntary payment made by the employer to the employee in recognition of continuous, meritorious services and sincere efforts by the employee towards organization. It is Governed under the Payment of Gratuity Act 1972. It is an act to provide a scheme for the payment of Gratuity to employees engaged in factories, mines, oilfields, plantations, ports, railway companies, and shops or other establishments.

Gratuity is service benefit to a long term employee of company. Gratuity received during the period of service is always taxable. It is a part of salary. Gratuity is exempt only when it is received on (a) Retirement, or (b) Becoming incapacitated prior to such retirement; or (c) Resignation; or (d) Termination or services If gratuity not received from former employer then completed year of Service = total period of both the employers. Exemption is also available to gratuity received by the widow, children or dependants of the employee on his death. If the employee receives gratuity from more than 1 employer then the aggregate amount of Gratuity exempt doesn’t exceeds the limits prescribed. If Gratuity received from former employer was exempted, then the exempted amount shall be reduced from 10 lakhs. Gratuity received by Govt. employees or employees under Civil Services Fully Exempt from Tax. The Exemption is available even if the employee after leaving the Govt. services joins Private sector.

**GRATUITY** Hi Gratuity is governed by Payment of gratuity act 1972 Definition of gratuity is that it is part of salary which is paid by the employer to his / her employee in gratitude for the services offered by employee to the company. Gratuity is a voluntary payment made by an employer to the employee for his continuous services given to the organisation. Maximum gratuity that can be paid is limited to 10,00,000. Thanks

Hie Roshni, **Definition of Gratuity is as follows :-** Gratuity is a part of salary that is received by an employee from his/her employer in gratitude for the services offered by the employee in the company. Gratuity is a defined benefit plan and is one of the many retirement benefits offered by the employer to the employee upon leaving his job. An employee may leave his job for various reasons, such as - retirement/superannuation, for a better job elsewhere, on being retrenched or by way of voluntary retirement. **Eligibility** As per Sec 10 (10) of Income Tax Act, gratuity is paid when an employee completes 5 or more years of full time service with the employer(minimum 240 days a year).