2. SALARY DEFERRAL
• Salary deferral means taking some
of employees income and putting it
aside for later. Literally he/she is
deferring his/her salary for later
use, usually for use at age 59 ½ or
thereafter.
• It is an easy and convenient way to
save.
• Also sometimes employer offers a
matching contribution to the
employee’s retirement plan. This
means if he/she defers some of
4. GRATUITY
DEFINITION:
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
5. ELIGIBILTY & TAX TREATMENT
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).
TAX TREATMENT OF GRATUITY
The gratuity received by the
employee is taxable under the head
‘Income from salary’. In case gratuity
is received by the nominee/legal heirs
of the employee, the same is taxable
in their hands under the head ‘Income
6. TAX TREATMENT
Contd..
• In case of government employees – they
are fully exempt from receipt of
gratuity.
• In case of non-government employees
covered under the Payment of Gratuity
Act, 1972 – Maximum exemption from tax
is least of the 3 below:
1. Actual gratuity received;
2. Rs 10,00,000;
3. 15 days’ salary for each completed
year of service or part thereof
7. TAX TREATMENT
Contd..
‘In case of non-government
employees not covered under the
Payment of Gratuity Act, 1972 –
Maximum exemption from tax is
least of the 3 below:
• Actual gratuity received;
• Rs 10,00,000;
• Half-month’s average salary for
each completed year of service (no
part thereof
8. FORMULA FOR CALCULATING
GRATUITY
Gratuity= (last drawn salary/26)* 15 days*
No. Of years of service
where,
last drawn salary= Basic+DA
Completed year of service or part thereof’
means:
• Full time service of more than 6 months
is considered as 1 completed year of
service & less than 6 months is ignored in
case of non-government employees
covered under the payment of gratuity
act.
• Less than 1 year is ignored in case of non-
government employees not covered under
9. PROVIDENT FUND
• The term Provident Fund is a fund
providing a compulsory
contribution for the future of an
employee after his retirement or
for his dependents in the event of
his early death.
• In such fund employee and
employer contribute equally.
• The PF contribution is 12% of Basic
salary from both employee and
10. Contd...
• Provident Fund comes under EPF -
Employees' Provident Funds and
Miscellaneous Provisions Act, 1952
and organaized by EPFO -
Employees' Provident Fund
Organisation which is a statutory
body of the Government of India
under Ministry of Labour and
Employment.
• In terms of Taxation, the employer
11. COMPONENTS TO CALCULATE PF
Currenct Age _____________ Years
Retirement age _________ Years
Current EPF balance _________ INR
Monthly basic pay ________ INR
Monthly dearness
allowance ________ INR
Contribution to EPF ___ %
Expected salary hike _____ %
12. TYPES OF PROVIDENT FUND
• CONTRIBUTORY PF:
All work charge Government
employees who were not getting
the benefits of pension are
subscribed to this Fund.
A subscriber, at the time of joining
the Fund is required to make a
nomination, in the prescribed form,
conferring on one or more persons
the right to receive the amount that
may stand to his credit in the Fund
13. A subscriber shall subscribe
monthly to the Fund. Rates of
subscription shall not be less than
8% of subscriber’s emoluments and
not more than his total
emoluments. An equal amount is
deposited in the account holders
account by the state government.
16. GROUP INSURANCE
• Group Insurance is an amount paid
to government employees after 60
years of employment along with
the interest.
• Monthly Rs. 30 to 60 is deducted
from the salary of the employee.
• In case of death of employee
before 60 years this/her family
member is given the amount.
18. SIGN-ON BONUS
• A signing bonus or sign-on bonus is a
sum of money paid to a prospective
employee by a company as an
incentive to join that company.
• Also known as joining bonus
• It is a one-time payment
• It has to be returned if the employee
quits before a specified period given
in the contract.
• Signing bonuses are often used in
professional sports, and to
recruit graduates into their first
jobs.
Editor's Notes
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.
FOR EG. IF D ACTUAL FIG. IS 14YEARS 7mnths it will be considered as 15 yrs.
number of days in a month is considered as 26Eg. If the actual fig. Is 14 years 7mnths it will be considered as 14 years only
(e.g., if the annual salary is lower than he or she desires).They are often given as a way of making a compensation package more attractive to the employee It also lowers the risk to the company as it is a one-time payment; for example, if the employee does not meet expectations, the company has not committed to a higher salary.To encourage employees to stay at the organisation, there are often clauses in the contract whereby if the employee quits before a specified period, they have to return the signing bonus.Some companies give it to all their new joinees, but the amount that they pay varies for the recruits based on the talent of the employee.
