7th Pay Commission: The impact of the double tax free gratuity bill

There is some good news after the 7th Pay Commission, with the Lok Sabha passing a bill to double tax-free gratuity.

The Lok Sabha today passed the Payment of Gratuity (Amendment) Bill which seeks to empower the government to fix the period of maternity leave and tax-free gratuity amount with an executive order. After the passage of the Payment of Gratuity (Amendment) Bill in the Rajya Sabha, the government would be able to enhance the ceiling of tax-free gratuity to Rs 20 lakh from existing Rs 10 lakh for an employee under the Payment of Gratuity Act.

An increase

After implementation of the 7th Pay Commission, the ceiling of gratuity amount for central government employees was increased from Rs 10 lakh to Rs 20 lakh. The unions are demanding for inclusion of the change into the Act. The bill was passed amid the din in the Lok Sabha today as uproar over a host of issues went for the second week in a row.

Important legislation

Parliamentary Affairs Minister Ananth Kumar said the Payment of Gratuity (Amendment) Bill was an important piece of legislation and sought the opposition's cooperation. The bill notifies the period of maternity leave as part of continuous service and proposes to empower the central government to notify the gratuity ceiling from time to time without amending the law.

Moving the bill for passage, Labour Minister Santosh Kumar Gangwar said it is a very important legislation for employees, especially women.

What next

Now, the bill will go to the Upper House for consideration and passage. At present, formal sector workers with five or more years of service are eligible for Rs 10 lakh tax-free gratuity after leaving job or at time of superannuation. A senior government official said that the government wants to provide tax-free gratuity of Rs 20 lakh to organised sector workers at par with the central government. The Payment of Gratuity Act, 1972, was enacted to provide for gratuity payment to employees engaged in factories, mines, oilfields, plantations, ports, railway companies, shops or other establishments. The law is applicable to employees, who have completed at least five years of continuous service in an establishment that has 10 or more persons. The amendment will also allow the central government to notify the maternity leave period for "female employees as deemed to be in continuous service in place of existing twelve weeks". The proposal comes against the backdrop of the Maternity Benefit (Amendment) Act, 2017 enhancing the maximum maternity leave period to 26 weeks.

7th Pay Commission dissatisfaction

After Central Government employees expressed dissatisfaction over the delay in raising the basic minimum pay, now, government teachers too have joined in. The agenda of the protest was based on their demand for 100% financial assistance to institution of higher education for uniform and simultaneous implementation of 7th Pay Commission report recommendations for the revision of scales in all the different states in the country. Apart from this, they even demanded the withdrawal of proposals grants by loans through HEFA, graded autonomy and Autonomous College Scheme.

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