Tax-free limit of gratuity to be Rs 20 lakh soon

Parliament on Thursday approved the Payment of Gratuity (Amendment) Bill, 2018, empowering the Central government to fix the period of maternity leave and the tax-free gratuity amount with an executive order. The Bill was passed by voice vote during Zero Hour without discussion in Rajya Sabha. The Lok Sabha had already passed the legislation last week.

Moving the Bill, Labour Minister Santosh Kumar Gangwar said it is a very important legislation for employees, especially women. It seeks to notify the period of maternity leave as part of continuous service and proposes to empower the government to notify the gratuity ceiling from time to time without amending the law.

While a notification is awaited, it is believed that with this new law, the government will enhance the ceiling of tax free gratuity to Rs 20 lakh from the existing Rs 10 lakh for employees falling under the Payment of Gratuity Act. Rajya Sabha Chairman M Venkaiah Naidu said he had met leaders of various parties in the morning and it was decided that the House would take up the crucial Payment of Gratuity (Amendment) Bill as it was of importance to the employees.

Enacted in 1972, the law was aimed to provide gratuity to employees engaged in factories, mines, oilfields, plantations, ports, railway companies, shops and other establishments. Employees who have rendered a minimum five years of continuous service with the establishment employing ten or more persons fall under the Act. The two amendments approved by the Parliament will empower the government to notify the period of maternity leave eligible for qualifying as continuous service and determine the amount of gratuity available to employees. After the amendment of the Maternity Act in 2017, the maximum maternity leave under the Maternity Act was changed from 12 weeks to 26 weeks.

The new law also removes the reference of 12 weeks and empowers the government to notify the maximum maternity leave. Earlier, the law had a ceiling of Rs 10 lakh on the maximum amount of gratuity payable to an employee. The new law empowers the government to notify the ceiling.

This amendment given enough room to the government to revise the limit with the increase in wage and inflation and future pay commissions, without approaching the parliament for seeking amendments in the law.

Amount of gratuity is directly proportional to the tenure of service, and also to the last drawn salary. The gratuity is given at the rate of 15 days of last drawn salary for each year of service.

KNOW GRATUITY

• Amount of gratuity is directly proportional to the tenure of service, and also to the last drawn salary.
   
• The gratuity is given at the rate of 15 days of last drawn salary for each year of service.