Gratuity in Karnataka
Reviewed by the Commoner Law Editorial Team. Sourced from Indian central (Union) law — Constitution of India, central Acts of Parliament, and Supreme Court decisions. State-level information reflects each state's own Acts and High Court rulings. Written in plain language for general understanding — this is educational content, not legal advice. Our editorial standards
What is this right?
Gratuity is a statutory terminal benefit payable by an employer to an employee who has completed at least five years of continuous service.
- Eligibility: Any employee (factory worker, plantation worker, mine worker, oilfield employee, port employee, or employee of an establishment with 10+ workers) who has completed 5 years of continuous service.
- If an employee dies or is permanently disabled, gratuity is payable even if 5 years have not been completed.
- Formula: (Last drawn basic salary + DA) × 15/26 × Number of completed years of service. Each year beyond 6 months counts as a full year; fractions below 6 months are ignored.
- Tax exemption: Gratuity up to ₹20 lakh is fully exempt from income tax for non-government employees (s. 10(10), Income Tax Act).
- Gratuity must be paid within 30 days of it becoming payable. Delays attract compound interest at the rate prescribed by the Central Government.
When does it apply?
- You resign, retire, or are retrenched after completing 5 years of continuous service with the same employer.
- You die or become permanently disabled while in service (5-year rule does not apply in these cases).
- Your employer refuses to pay or calculates gratuity at a lower amount than due.
What to Do If Your Employer in India Refuses to Pay Your Gratuity
- Submit Form I (Notice of Claim) to your employer within 30 days of gratuity becoming payable (or after death/disability, by your nominee/legal heir).
- Your employer must respond with Form L (Notice of Payment) within 15 days, specifying the amount and date of payment.
- If the employer refuses or pays less, file an application before the Controlling Authority (typically the Labour Commissioner) under s. 7 of the Act — the Controlling Authority can direct payment plus 10% per annum interest on delayed amounts.
- Appeals against the Controlling Authority's order lie to the Appellate Authority (within 60 days).
What should you NOT do?
- Do not resign just before completing 5 years without calculating whether gratuity is due — service just past the 4-year 6-month mark (treated as 5 full years) can trigger entitlement.
- Do not forfeit gratuity by committing an act of wilful omission or negligence causing loss/damage — gratuity can be forfeited wholly or partially in such cases (s. 4(6)).
- Do not accept a private settlement for less than the statutory amount without consulting a labour lawyer first.
How Karnataka differs from central law
Gratuity in Karnataka follows the central Payment of Gratuity Act, 1972. Karnataka's large IT/ITES and service sectors make gratuity a significant issue, especially regarding the definition of "continuous service" for contract and project-based workers.
- Standard entitlement: Any employee who has completed 5 years of continuous service is entitled to gratuity at the rate of 15 days' wages for each completed year of service (or part thereof exceeding 6 months). The maximum is Rs 25 lakh.
- IT sector issues: In the IT sector, frequent project changes and internal transfers do not break continuous service. Service across different projects within the same company counts as continuous service for gratuity purposes.
- Karnataka High Court rulings: The Karnataka High Court has upheld that gratuity must be calculated on the last drawn wages including all regular allowances, not just basic pay, consistent with the Supreme Court's interpretation.
- Enforcement: The Controlling Authority under the Payment of Gratuity Act in Karnataka is the Assistant Labour Commissioner of the relevant district. Claims must be filed within 30 days of the gratuity becoming payable (extendable for cause).
Additional Steps in Karnataka
File a gratuity claim with the Controlling Authority (Assistant Labour Commissioner) at your district labour office if your employer fails to pay within 30 days of it becoming due. Interest at 10% per annum is payable on delayed gratuity.
Relevant Law: Payment of Gratuity Act, 1972; Karnataka — Controlling Authority is the Assistant Labour Commissioner at the district level
Common Questions
When does gratuity apply?
You resign, retire, or are retrenched after completing 5 years of continuous service with the same employer.You die or become permanently disabled while in service (5-year rule does not apply in these cases).Your employer refuses to pay or calculates gratuity at a lower amount than due.
What should I do if my employer in India refuses to pay my gratuity after I leave?
Submit Form I (Notice of Claim) to your employer within 30 days of gratuity becoming payable (or after death/disability, by your nominee/legal heir).Your employer must respond with Form L (Notice of Payment) within 15 days, specifying the amount and date of payment.If the employer refuses or pays less, file an application before the Controlling Authority (typically the Labour Commissioner) under s. 7 of the Act — the Controlling Authority can direct payment plus 10% per annum interest on delayed amounts.Appeals against the Controlling Authority's order lie to the Appellate Authority (within 60...
What mistakes should I avoid with gratuity?
Do not resign just before completing 5 years without calculating whether gratuity is due — service just past the 4-year 6-month mark (treated as 5 full years) can trigger entitlement.Do not forfeit gratuity by committing an act of wilful omission or negligence causing loss/damage — gratuity can be forfeited wholly or partially in such cases (s. 4(6)).Do not accept a private settlement for less than the statutory amount without consulting a labour lawyer first.
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