Home Business Finance & Investment Top Gratuity Calculation and PF Related FAQs Answered

Top Gratuity Calculation and PF Related FAQs Answered


We all know the importance of savings, however, today’s generation fails to maintain a balance between spending and saving wisely. Despite having been working for years, many employees are still unaware of some important employee rights that have been given to all the working individuals by the Indian government. If managed properly, such rights can make employees cash-rich and help in frail days. EPF and gratuity are two such benefits. Gratuity brings stability and loyalty in the form of lump-sum money. On the other hand, EPF is a widely-used investment scheme by the salaried class in India.

Top Gratuity Calculation and PF Related FAQs Answered

Regardless of being two familiar words, many employees still have a lot of queries regarding gratuity calculation and online pf withdrawal. If you are also one of them, keep reading the blog to get answers to your questions.

How is gratuity calculated?

While calculating gratuity, 240 working days of a year are considered as 1 year. That means, 26 days of a month are considered as 1 month. Keep in mind, the gratuity calculation formula always depends on the income and total years of service of an employee.

For corporate employees who get salary on a monthly basis, the law states:

Gratuity = 15 Days of Monthly Salary for Every Completed Year Of Service

And the formula to calculate the Gratuity Amount is as follows:

SALARY * TENURE * 15/26 [* implies multiplication]

SALARY = Basic pay + Allowance + Commission
TENURE = Total no. of service years
15 = Days for which salary is considered per month
26 = number of working days in a month

Who is Eligible for Gratuity?

A working employee who has completed a minimum of 5 years of service with a company is eligible to acquire gratuity. A tip can also be compensated before the end of five decades, i.e. when an employee dies or becomes disabled due to some illness / accident.

Who is not eligible for gratuity?

An employee will not receive gratuity when he/she has been terminated due to any illegal activity, immoral act, violence, or theft.

What are the rules of EPF withdrawal?

If an employee wishes to withdraw funds from his/her EPF account, then he/she should keep the following rules in mind-

  • If PF is withdrawn within 5 years of opening the account, then it is taxable
  • One does not have to withdraw PF when changing the organization as the provident fund can be easily transferred to a whole new account via online process
  • An employee is not allowed to withdraw the PF balance of a job where he/she is currently employed
  • Loan, i.e partial withdrawal, can be availed on EPF

How to apply for online pf withdrawal?

One should follow the steps listed below for online pf withdrawal:

Step 1: Visit the EPFO site.
Step 2: Then, hit the online claim button on the homepage.
Step 3: Fill in UAN and password.
Step 4: Hit the ‘Manage’ tab and choose KYC to check if the KYC details including Aadhaar, PAN, and bank details are verified or not.
Step 5: Then, go to the Online Services tab and choose the ‘Claim’ option from the menu.
Step 6: You will be directed to The ‘Claim’ screen that will ask for some details. Hit the ‘Proceed For Online Claim’ tab to fill in the claim form.
Step 7: In the claim form, choose a preferred claim, that is full EPF Settlement or EPF Part withdrawal or pension withdrawal and then submit.

What are the conditions for complete EPF withdrawal?

An employee is eligible to withdraw complete EPF in the following two conditions:

  • When an employee retires
  • When an employee remains unemployed for 2 months or more.

Bottom Line!!!

There are a number of queries related to gratuity and PF but the aforementioned questions are the most common ones. And we hope this blog helped you to get a clear picture of gratuity calculations and online pf withdrawal. Also, it is the duty of employers to educate their workforce about employee rights.


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