Standards of conditions of employment prescribed by any labor law are minimal only. It is, therefore, either the bargaining power of labor in the process of collective bargaining or the magnanimity of an employer which gives rise to determination of better benefits or higher scales for calculation of monetary benefits than those prescribed under any labor law. In my own experience as a Conciliation Officer, the dead lock in the wage revision negotiation affecting 3000 employees due to the egoistic stand of the management and the trade unions was resolved at last by the suggestion to the formula of 20 days wages for every completed year of service. Besides, section 4(5) of the Payment of Gratuity Act explicitly permits receipt of better terms of gratuity under any award or agreement or contract between the parties.
Coming to taxability of the amount received by way of gratuity under the PGA,1972, Section 10(10) of the Income Tax gives exemption up to a maximum amount of Rs 20 lakh. So long as the amount falls below the ceiling, my opinion is that we need not bother about the calculation or the minimum no of years of service on termination.