The Parliament today passed the Payment of Gratuity (Amendment) Bill which will extend the ceiling of tax-free gratuity amount to Rs 20 lakh from Rs 10 lakh. This Law will allow the government to increase the gratuity ceiling from time to time without amending the law. The Law also allows the government to fix the period of maternity leave for female employees in continuous service in place of the 12 weeks, the amendment to the payment of gratuity. The maximum gratuity amount that is tax exemption applies to a person’s entire career. What this means is that during your complete working life, the tax-exempted gratuity amount you can challenge cannot exceed Rs 10 lakh currently in total from one or more employers. The employers can pay more than what the gratuity formula says if they feel so. The Payment of Gratuity Act, 1972 does not restrict them from doing so. The Act only commands the minimum limit which is exempted from tax.
The Rajya Sabha, which has failed to transact any significant business over the last fortnight due to protests by various parties, today passed the Payment of Gratuity (Amendment) Bill without any discussion. The bill moved by Labour Minister Santosh Kumar Gangwar who passed it by a voice vote. In Last week, The Lok Sabha had approved this organization bill.
After the implementation of the 7th Pay Commission, the ceiling of gratuity amount for central government employees had been doubled to Rs 20 lakh. It also permits the government to fix the duration of maternity leave for female employees.
What is Gratuity?
Gratuity is a voluntary Payment which is made by the employer to the employee in recognition of, meritorious services, continuous and sincere efforts by the employee towards the organisation. It is directed under the Payment of Gratuity Act 1972. It is an Act to provide for a scheme for the payment of gratuity to employees engaged in factories, mines, oilfields, plantations, ports, railway companies, and shops or other establishments.