CMA Intermediate · Business Laws and Ethics · Payment of Gratuity Act, 1972
Sunil retires from a Chennai company covered by the Act after 30 completed years of service. His last drawn monthly pay was basic ₹90,000, dearness allowance ₹30,000 and house rent allowance ₹20,000. Taking wages as basic plus dearness allowance, what gratuity is payable?
Gratuity payable is ₹20,00,000. Wages of basic plus dearness allowance are ₹1,20,000, and the formula gives about ₹20,76,923 for 30 years. Since the Act limits gratuity to ₹20,00,000, the excess cannot be claimed as statutory gratuity.
- A₹20,76,923
- B₹18,00,000
- C₹20,00,000Correct
- D₹24,23,077
Explanation
Wages = 90,000 + 30,000 = ₹1,20,000. The formula gives 1,20,000 × 15/26 × 30 = ₹20,76,923. This exceeds the statutory ceiling of ₹20,00,000, so only ₹20,00,000 is payable. The uncapped figure is the main wrong option, and the HRA-inclusive figure also ignores the cap.
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