Gratuity and Bonus to employees

S.No Particulars Gratuity (Payment Of Gratuity Act,1972) Bonus (Payment Of Bonus Act,1965)
Applicability
1 Organisation/Employer Applies to all shops or establishments having 10 or more employees at any time during the preceding 12 months Applies to every factory registered under Factories Act & Establishment employing 20 or more on any day during the year.
2 Employee/worker Gratuity is payable only when the employee is in continuous service for 5 years

The employee / worker receiving salary or wages up to Rs.21,000 per month.

Such person should have worked for atleast 30days in the year.

Calculation
3 Minimum Gratuity payable = ( Last drawn basic salary + DA ) *15/26 *No of completed years of service Minimum: 8.33% of salary/wages (or) Rs. 100 (whichever is higher)
Maximum: 20%(if wages is more than 7000/month restrict the salary or wages to Rs. 7000 for the purpose of calculation of minimum bonus )
Salary or Wages definition
4 Inclusion Basic + D.A. Basic + D.A.
Compliance
5 Due Date Within 30 days from the date the gratuity becomes payable. Within 8 months from the end of the accounting year.
Income tax impact
6 Tax impact Gratuity received by an employee upto Rs. 20,00,000/- is exempt in the hands of the employee under section 10(10) of the Income tax Act, 1961. Bonus is taxable in the hands of the employee at regular slab rate.
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