Gratuity

Note: This topic keeps updating whenever a new payroll report is added to Keka

As of now, there are around 50 payroll reports available on Keka with many more coming soon.  To view the available reports, please go to Payroll >> Reports.

Few examples of payroll reports available on Keka:

Payroll:

• Current Salary Structure
• Current Salary With Bonus
• Employees Current CTC
• Expense Claim Report
• Financial Information
• Component break up for each employee (Pay Register)
• Contribution / Deduction Reconciliation Report
• Head Count Monthly Report
• Monthly Batch Payment – Bank Transfer, Cheque, Cash
• Payroll Journal Vouchers Report – Tally
• Salary Revision Report
• All Employee YTD Report

Income Tax:

• Annual Income Tax Report
• Annual HRA Reports
• Investment Declaration Summary Report
• Monthly Income Tax Statement

Provident Fund (PF):

• PF Remittance Report
• PF Monthly Electronic Return (ECR)
• PF Contribution card – Form 6A
• PF Joinee Statement – Form 5
• PF Exits Statement – Form 10
• PF Monthly Statement – Form 12A (Revised)
• Aadhar (UIDAI) submission Form
• PF Summary Report
• PF Arrear Report
• PF Admin Charges Report

Employees’ State Insurance (ESI):

• ESI Monthly Statement
• ESI Monthly Return (Electronic)
• Contribution Register (Form 5)
• ESI Overrides
• ESI Summary Report

Professional Tax (PT):

• PT Monthly Statement
• PT State Wise Report (Form 5)
• PT Override Report

 

If you are looking for any specific report, write to support@keka.com.

Gratuity Configuration on Keka

Gratuity is a part of salary that is received by an employee from the employer in gratitude for the services offered by the employee to the company. An employee becomes eligible for gratuity only after completion of 5 or more years of full time service with the same employer.

Related: What is Gratuity?

In case your organisation contribute towards gratuity for employees, you should first configure it on Keka and then add it to employees’ salary structure.  This can ONLY be done by user having either ‘Global admin’ or ‘Payroll admin’ role on Keka for their organisation’s account.

To configure gratuity on Keka, follow the steps below:

Step 1: Go to Settings >> Payroll >> Salary Components & Structures

 

Step 2: Under ‘Salary Components & Structures’, go to ‘Recurring Components’ (Section 2) to view list of all salary components.

Few components, such as Medical, Transport, Gratuity etc. are enabled by default and can be configured before adding it to any salary structure. A component will only be applicable for employees, if it is added to their salary structure.

 

Step 3: In the list of all pre-defined components, go to ‘Employee Gratuity contribution’ and click on ‘Edit’ link against the component.

 

Step 4: On the ‘Employee Gratuity Contribution’ pop-up that appears, configure options including maximum limit of gratuity per annum, number of months of service required for being eligible for gratuity, etc.

Maximum Limit Per Annum: Define this limit for Keka system to know the maximum amount of gratuity per annum that can be contributed by the organisation for it’s (individual) employee. All employees’ gratuity contribution will be less than or equal to this maximum amount.

Minimum no. of months of employment required for eligibility: Define minimum months of employment required (in the organisation) for an employee to be eligible for gratuity. As per Gratuity Act, this is by default 60 months, i.e. 5 years.  You can change this duration.

Include component in Arrears calculation: Check this box if you wish to consider arrears that might have accumulated due to salary revision with past effective dates.

For example, the employee had a salary of Rs. 50,000 from May to October, and the amount of gratuity has been calculated on the Salary of Rs. 50,000.  In the month of October, there has been a salary revision of employee with revision effective date of 1st July. Since there has been a delay in salary revision, there is a salary arrear that needs to be paid out (for past months) to the employee because of the salary revision with past effective date. In such cases the amount of gratuity contributed might also need revision for past months.

Allow this component value to be customized and override at employee level: If, in your organisation, the amount of gratuity contribution varies even for the employees’ having same salary structure, or you wish to limit the amount that is being contributed for selective employees, check this box.  You will have an option to over-ride the amount of contribution at individual employee level.

Related: How do I override salary component value/amount for an employee?

Loss of pay due to employee attendance will affect this component: In case loss of pay (LOP) in a month affects the gratuity amount, check this box.

 

Once done with configuring the Gratuity component, click on ‘Update’ button.  This will update the Gratuity settings.

To learn how to assign this component to a salary structure, read How do I create a salary structure and manage its components?

 

In case you are having trouble configuring ‘Employee Gratuity Contribution’, write to support@keka.com.

Gratuity

Gratuity is derived from the word ‘Gratitude’. As the term indicates, Gratuity is a part of salary that is received by an employee from the employer in gratitude for the services offered by the employee to the company.

Eligibility for Gratuity

An employee becomes eligible for gratuity only after completion of 5 or more years of full time service with the same employer. It is more of a retirement benefit and social security benefit received by the employee when they are leaving their job. For the purpose of gratuity calculation, the number of years of service is rounded off to the nearest full number. For example, if you have completed 6 years and 8 months, it will be rounded off to 7 years. In case you have completed 8 years and 5 months, the number of years will be rounded off to 8 years only.

Contribution to Gratuity

Unlike EPF, the employer pays gratuity amount, and employee doesn’t have to contribute in gratuity. Employer can either choose to pay for gratuity from their own fund or approach a life insurer to purchase a group gratuity plan. In case of a group gratuity plan, the employer should make annual payments as decided by the insurer. The employee can make contributions to gratuity in this case but it is not mandatory.

Calculation of Gratuity

The formula to calculate gratuity differs for employees who are covered under gratuity act and the ones who are not.

For employees under gratuity act:

Any employee whose workplace consists of more than 10 employees will be covered under the gratuity act. The formula for calculation of gratuity is:

Gratuity = [(Basic Pay + D.A) x 15 days x No. of years of service] / 26.

For employees not covered under gratuity act:

If the number of employees are less than 10, the company is not covered under the gratuity act. Even if the company is not covered under gratuity act, an employer can always choose to give gratuity to the employee for their service.

The formula for calculation of gratuity is:

Gratuity = [Average of last 10 months salary x No. of years of service] / 2.

Taxability of Gratuity

Some portion of gratuity received is exempt from tax as per Section 10(10) of the Income Tax.

The tax exemption on gratuity differs for following 3 categories:

• Government Employees:

Any gratuity received by an employee of the Central Government, State Government or local authority, on death or retirement is fully exempted from tax.

• Non-government Employees covered under Gratuity Act:

Maximum tax exemption will be least of the following 3:

1. Actual gratuity received
2. Rs. 10,00,000
3. 15 days’ salary for each completed year of service or part thereof (*) (number of days in a month is considered as 26. Therefore, 15 days’ salary = (Salary * 15/26))

Salary = Basic + D.A.

*Completed year of service or part thereof – Full time service of more than 6 months is considered as 1 completed year of service; and less than 6 months is ignored. For example, if you have completed 6 years and 8 months, it will be rounded off to 7 years. In case you have completed 8 years and 5 months, the number of years will be rounded off to 8 years only.

Example:

Sam worked with company X (covered under Gratuity Act) for 12 years and 9 months. At the time of leaving, his salary was Rs. 50,000 and he received Rs. 6,00,000 as gratuity. Here’s how the tax exemption will be calculated:
1. Actual gratuity received: Rs. 6,00,000
2. Rs. 10,00,000
3. 15 days’ salary for each completed year of service or part thereof: [50,000 * 13 * 15]/26 = Rs. 3,75,000

The least of the 3 is Rs. 3,75,000 and thus this amount will be tax exempted. Remaining amount of Rs. 6,00,000 – Rs. 3,75,000 = 2,25,000, will be taxable.

• Non-government employees not covered under Gratuity Act:

Maximum tax exemption will be least of the following 3:

1. Actual gratuity received
2. Rs. 10,00,000
3. Half-month’s average salary for each completed year of service and no part thereof (#).

Salary = Basic + D.A.

#Completed year of service and no part thereof – Full time service of more than 1 year is considered as 1 completed year of service; and less than 1 year is ignored. For example, if you have completed 6 years and 8 months, it will be rounded off to 6 years.

Example:

Abhishek worked with company Y (not covered under Gratuity Act) for 15 years and 8 months. He receives Rs 7,00,000 as a gratuity and his average monthly salary of 10 months immediately preceding month of completing service is Rs 30,000. Here’s how the tax exemption will be calculated:
1. Actual gratuity received: Rs. 7,00,000
2. Rs. 10,00,000
3. Half-month’s average salary for each completed year of service and no part thereof: [30,000 * 15]/2 = Rs. 2,25,000

The least of the 3 is Rs. 2,25,000 and thus this amount will be tax exempted. Remaining amount of Rs. 7,00,000 – Rs. 2,25,000 = 4,75,000, will be taxable.

Related: How do I configure gratuity for my employees on Keka?