The legal requirements for gratuity payments in India are primarily governed by the Payment of Gratuity Act, 1972. This Act outlines the rules and regulations related to the payment of gratuity to employees. Here are the key legal requirements for gratuity payments in India: Applicability: The Payment of Gratuity Act, 1972, applies to every factory, mine, oilfield, plantation, port, and railway company. It also applies to shops or establishments employing ten or more employees on any day in the preceding 12 months. Eligibility: An employee is eligible for gratuity if they have completed at least five years of continuous service with their employer. However, gratuity can also be paid before five years in cases of death or disability. Calculation of Gratuity: The gratuity amount is calculated using a specific formula provided by the Act. The formula is: Gratuity = (Last drawn salary * 15/26) * (Number of years of service) The "last drawn salary" includes basic pay and dearness allowance. Maximum Limit: As of my last knowledge update in September 2021, the maximum amount of gratuity that can be paid is ₹20 lakhs (₹20,00,000). Any amount exceeding this limit is not considered as gratuity under the Act. Payment Period: Gratuity should be paid within 30 days from the date it becomes payable to the employee. If there is a delay in payment, interest is payable to the employee for the period of delay. Nomination: Employees are encouraged to nominate a nominee who will receive the gratuity amount in case of the employee's death. Tax Implications: The gratuity received is taxable as per the Income Tax Act, 1961. However, there are exemptions available, and the exempted amount depends on the type of employer (government, public sector, or other) and whether the employee is covered under the Payment of Gratuity Act. Disputes and Appellate Authorities: In case of disputes related to gratuity, the Act provides for an appellate authority to adjudicate such disputes. It's important to note that while these are the key legal requirements for gratuity payments in India, there may have been updates or changes in the law since my last knowledge update in September 2021. Employers are advised to consult the latest provisions of the Payment of Gratuity Act and stay informed about any amendments or changes in the law to ensure compliance with the legal requirements for gratuity payments.

Dear Client, In India, gratuity payments are governed by the Payment of Gratuity Act, 1972. Some basic legal requirements for it are – 1. Only the employees who have completed at least 5 years of continuous service with an employer are eligible. 2. Gratuity is paid upon termination of employment. There can be multiple reasons for such termination, like – retirement, resignation, death, or disablement. 3. It is generally calculated as 15 days’ wages for each completed year of service done by the employee and it is based on the last drawn salary of the employee. 4. There is a maximum limit, however, to the gratuity amount under the Act, this maximum amount is Rs. 20 lakhs and any amount above this is not free from tax. 5. Gratuity shall be paid within 30 days from the date when it becomes due and if the employer fails to do so, he/she may have to pay interest to the employee due to this delay. 6. Non-payment or delay in payment of gratuity can also be punishable by fines or imprisonment in severe cases. I hope this answer helps. For any further queries, please do not hesitate to contact us. Thank you.