News: Tax-free gratuity limit increases to Rs. 20 lakh

Employee Relations

Tax-free gratuity limit increases to Rs. 20 lakh

The Parliament has cleared the Payment of Gratuity (Amendment) Bill, 2018 where the gratuity ceiling has been increased from Rs 10 lakh to Rs 20 lakh.
Tax-free gratuity limit increases to Rs. 20 lakh

The Parliament has cleared The Payment of Gratuity (Amendment) Bill, 2018 which allows the government to remove the existing Rs 10 lakh ceiling on gratuity to Rs. 20 lakh. Gratuity is paid to employees if they have provided at least five years of continuous service to a company at the time of resignation or termination. As reported in People Matters earlier, it is to be noted that the government, after the 7th Pay Commission recommendations, had already raised the tax-free limit on gratuity to Rs. 20 lakh from 2016. 

The proposed law will also fix the maternity leave period to 26 weeks for computation of continuous period. This is because the maximum maternity leave was based on the maternity leave provided under the Maternity Benefit Act, 1961. 

Santosh Kumar Gangwar, Labour Minister, India, was quoted in media saying, "The amended Bill will benefit lakhs of employees who work in the organized sector, especially women."

It is also reported that the gratuity law will help people working in the private and unorganized sector. Also, the passage of this amended bill will hugely benefit the middle and senior management employees who are getting higher salaries. 

Anshul Prakash, Partner, Khaitan & Co, shared in media, "Once the Gratuity Amendment Act comes into the force after receiving presidential assent and notification in the Official Gazette, it would provide greater benefit advantage for employees as it is likely that Income Tax limits are raised as it has been the case in the past." He further said that the amendment also gives flexibility to the government to extend the ceiling in the future by mere notification as opposed to the requirement of an amendment.

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Topics: Employee Relations

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