1. Income tax returns: No tax on Rs 20 lakh gratuity for private employees

Income tax returns: No tax on Rs 20 lakh gratuity for private employees

The government has amended the Payment of Gratuities Act where private sector employees will now be able to withdraw up to R20 lakh in tax-free gratuity.

By: | Published: March 1, 2017 2:03 AM
Payment of Gratuities Act, Income Tax Policy, government employees, tax-free gratuity, central government employees, 7th Pay Commission, Gratuity Act, retirement, disposable income The government has amended the Payment of Gratuities Act where private sector employees will now be able to withdraw up to R20 lakh in tax-free gratuity.

The government has amended the Payment of Gratuities Act where private sector employees will now be able to withdraw up to R20 lakh in tax-free gratuity. Till now the tax-free limit was R10 lakh. For government employees, however, the limit is R20 lakh.

i. This move has brought private sector employees on a par with the central government employees.

ii. The 7th Pay Commission allows the central government employees to withdraw tax-free gratuity up to
R20 lakh.

iii. All companies and establishments employing 10 or more workers come under the Gratuity Act.

iv. An employee who has completed five years of continuous service in an organisation is eligible for gratuity.

v. The eligible gratuity amount for an employee is calculated as last drawn monthly salary multiplied by 15/26 and multiplied by the number of years of service.

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vi. Salary means basic salary plus dearness allowance and 15/26 is 15 working days’ pay of the 26 days of pay.

vii. The limit of R20 lakh is applicable throughout the lifetime of the employee. So, if an employee receives gratuity from more than one employer, this limit of R20 lakh would be applicable on the cumulative amount of gratuity received from all of them.

viii. This move is expected to be beneficial for most of the private sector employees since a substantial tax outgo would be reduced. This would increase the amount of disposable income in their hands after retirement.

  1. R
    RAJARAM GAUTAM
    Oct 14, 2017 at 11:36 am
    It is not clear that amendment has been made in sec.10(10) of gratuity act regarding ceiling of 10 Lacs to 20 lacs.
    Reply
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      Pradip B Hirlekar
      Oct 3, 2017 at 8:09 pm
      I am retired on 31/12/2016, The tax calculated above 10,00,000. I wish to know the date from which the limit is increased to 20,00,000. Am I eligible to get refund of I/Tax paid ?
      Reply
      1. M
        manjunath
        Aug 14, 2017 at 12:58 pm
        Sir I want to apply VRS as on 30_11_17 whether act is applicable from 1_1_16 OR 1_1_17 or It may also apply from 1_1_18
        Reply
        1. A
          A K Aggarwal
          Aug 8, 2017 at 3:05 pm
          I have served in a private sector company for about 35 years relieved as on 31st may-2017. My employer considered Rs 10 lac as my grautiy where as per calculation I become eligible for 20 lakh. When I can get my balance 10 lakhs. pl advise. A. K Aggarwal
          Reply
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            Ramesh pant
            Jul 7, 2017 at 2:54 pm
            When will it happen.WHAT IS THE PRESENT STATUS OF ENHANCEMENT OF GRATUITY W. E. F 1.1.2016 AS PERMITED IN CASE OF CENTRAL GOVT EMPLOYEES.
            Reply
            1. A
              Ashok
              Jul 4, 2017 at 5:16 pm
              Has this rule of enhanced gratuity appearing in the Income tax laws so that organisation can take benefit otherwise it will remain a act .
              Reply
              1. M
                Mohan menon
                Jul 2, 2017 at 7:02 pm
                When is it effective from
                Reply
                1. S
                  Shri S.
                  Jun 27, 2017 at 4:39 pm
                  Dear Sir, Please arrange to send the copy of Notification for the amendment of Payment of Gratuity Act [from Rs. 10 Lakhs to Rs.20 Lakhs]. Thanks, Shri. S. G. Modak
                  Reply
                  1. Elango Chelliah
                    Jun 23, 2017 at 1:19 pm
                    Whether retrospective effect will be given if d bill amended at a later date
                    Reply
                    1. Elango Chelliah
                      Jun 23, 2017 at 9:41 am
                      When gratuity act will be amended
                      Reply
                      1. A
                        A. K. Sharan
                        Jun 21, 2017 at 7:36 pm
                        Gratuity amendment notifications 2017,it is heard last 4 months but not yet approved, pl raise this matter and also try to amend as early as possible
                        Reply
                        1. G
                          G.K.
                          Jun 21, 2017 at 7:06 pm
                          I am a bank officer retired on May 2017 with total service of 38 years. WHETHER I am eligible for GRATUITY of Rs 20 lakh and when we expect the amendment
                          Reply
                          1. S
                            S S YADAV
                            Jun 20, 2017 at 4:53 pm
                            I am retired from Baroda UP Gramin Bank on 31Jan.2017.I was member of EPFO.Whether I will be eligible for amended gratuity? When this limit will be applicable?
                            Reply
                            1. M
                              M. Malla Reddy
                              Jun 19, 2017 at 11:28 am
                              I was retired on 31st of May 2017 from a pharma private limited company. They have deposited 10lakhs instead of 14 lakhs eligible. As per company eligibility is for 10 lakhs limit. Does the relaxation of 20 lakhs limit eligibility for my case also. I worked for company for 20 years and retired in the month of May 2017. Please suggest.
                              Reply
                              1. E
                                Elango
                                Jun 17, 2017 at 10:20 am
                                When will d gratuity act amended as per 7th pay commission
                                Reply
                                1. K
                                  K S REHAL
                                  May 10, 2017 at 1:36 pm
                                  Any latest update of passing the amendment of this bill in cabinet meeting? When we can expect any Govt notification of this bill.
                                  Reply
                                  1. D
                                    D GOSWAMI
                                    May 10, 2017 at 11:24 am
                                    Any latest update of passing the amendment of this bill in cabinet meeting? When we can expect any Govt notification of this bill.
                                    Reply
                                    1. A
                                      A Rajaram
                                      May 9, 2017 at 11:59 am
                                      A very good move. This should have been done long ago. Any how while making an amendment the facility can be made from retrospective date of atleast five years.
                                      Reply
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                                        DG
                                        Apr 15, 2017 at 1:56 pm
                                        this news should say amendment is proposed. It has not been notified yet to become law.
                                        Reply
                                        1. D
                                          D M
                                          Apr 8, 2017 at 11:49 am
                                          When the expected amendment for increasing ceiling will come in to reality.
                                          Reply
                                          1. G
                                            Goverthanan
                                            Mar 2, 2017 at 6:33 am
                                            WHEN WAS THE GRATUITY ACT AMENDED? NOT ABLE TO TRACE ANY NOTIFICATION?
                                            Reply
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