1. Big retirement benefit: Centre clears bill to double tax-free gratuity to Rs 20 lakh

Big retirement benefit: Centre clears bill to double tax-free gratuity to Rs 20 lakh

The Centre today approved an amendment bill that seeks to double tax-free gratuity for formal sector employees to Rs 20 lakh.

By: | New Delhi | Published: September 12, 2017 6:27 PM
Centre, gratuity under the Act is Rs 10 lakh, Parliament, Modi Government The current upper ceiling on gratuity under the Act is Rs 10 lakh. (AP)

The Centre today approved an amendment bill that seeks to double tax-free gratuity for formal sector employees to Rs 20 lakh. “The Union Cabinet chaired by Prime Minister Narendra Modi has given its approval to introduction of the Payment of Gratuity (Amendment) Bill, 2017, in Parliament,” an official statement said. The amendment will put the maximum limit of gratuity of employees of the private sector as well as public undertakings and autonomous organisations under the government who are not covered under Central Civil Services (Pension) Rules, at par with central government employees, which is Rs 20 lakh.

The current upper ceiling on gratuity under the Act is Rs 10 lakh. The provisions for central government employees under Central Civil Services (Pension) Rules, 1972, with regard to gratuity are also similar.

Before implementation of the 7th Central Pay Commission, the ceiling under CCS (Pension) Rules, 1972, was Rs 10 lakh. However, post rollout, in the case of government servants, the ceiling stands at Rs 20 lakh, effective January 1, 2016.

Considering inflation and wage increase even in the case of employees engaged in the private sector, the government is of the view that the entitlement of gratuity should be revised for employees who are covered under the Payment of Gratuity Act, 1972.

Accordingly, the government initiated the process for amendment to the Payment of Gratuity Act, 1972, which applies to establishments employing 10 or more persons.
The main purpose for enacting this Act is to provide social security to workmen after retirement, whether it is because of rules of superannuation, or physical disablement or impairment of vital parts of the body.

Therefore, the Gratuity Act serves as a key social security legislation to wage earners in industries, factories and establishments.

  1. L
    Lakshmi narsimha Raju
    Sep 16, 2017 at 8:30 am
    The gratuity amount enhanced to 20 lakhs is welcome but from which date it's affected, because many people like me retired some time back feel bad but definitely the decision is welcome thanks.
    Reply
    1. S
      Sreekumar G
      Sep 14, 2017 at 4:53 pm
      Good Move... Big relief to retired people.
      Reply
      1. J
        Jagdish Pai
        Sep 12, 2017 at 9:21 pm
        The increase in the exemption from 10 lakh to 20 lakh is effective from what date
        Reply
        1. V
          Vijay Kumar Gupta
          Sep 13, 2017 at 2:22 pm
          This amendment in Central Government is applicable w.e.f. 01.01.2016 but in cases of others, like Bank it is not clear. Please advise effective date.
          Reply
        2. S
          Shital Jadeja
          Sep 12, 2017 at 7:13 pm
          Nice step in the welfare of employees.
          Reply
          1. N
            Narendra Thakur
            Sep 12, 2017 at 6:57 pm
            It is overt from the contents of the above article that in the case of Central Government Employees limit of Income Tax free Gratuity hiked from Rs.10 Lakhs to Rs.20 Lakhs but from which date limit of Rs.20 Lakhs is applicable for Public Sector Employees is no where mentioned. What tax treatment is to be given for Employees of Public Sector Insurance Companies, who retired during January 2016 till August, 2017? Will this hike take retrospective effect, if yes, the assessee will have to invoke Sec.89 (1) segregation of income to the year to which it pertains?
            Reply
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