Gratuity
Definition
A lump-sum payment made by an Indian employer to an employee who has completed a minimum period of continuous service, calculated on last-drawn salary and years of service, payable on retirement or exit.
Related Terms in Payroll
Basic Salary
The fixed core component of an employee's pay, before allowances and bonuses. Many statutory calculations — provident fund, gratuity and others — are based on basic salary, so its proportion of the package matters.
Cost to Company (CTC)
The total annual cost an employer bears for an employee in India, including salary, allowances, employer contributions and benefits. It is larger than take-home pay because it includes costs the employee never receives in cash.
Dearness Allowance (DA)
A cost-of-living adjustment paid to employees, chiefly in the Indian public sector, calculated as a percentage of basic pay and revised periodically to offset inflation.
Leave Travel Allowance (LTA)
An allowance Indian employers pay to cover an employee's travel costs within the country, which can be exempt from tax subject to conditions and limits under the old tax regime.
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