Gratuity Act likely to change; double tax-free gratuity to Rs 20 lakh

The move comes after the seventh pay commission’s recommendation allowing central government employees to earn tax-exempted gratuity up to Rs 20 lakh.

New Delhi, July 11: Bringing cheers for thousands of private sector employees, the government is likely to amend the Gratuity Act to enhance the ceiling of gratuity to Rs. 20 lakh from Rs. 10 lakh. The Gratuity Amendment Bill seeks to make formal sector workers eligible for up to Rs. 20 lakh tax-free gratuity.

The proposal will be tabled in the monsoon session of Parliament commencing on July 17 for approval.

The 7th Pay Commission allows the central government employees to withdraw tax-free gratuity up to Rs 20 lakh.This move has brought private sector employees on a par with the central government employees.

Currently, private sector employees can get tax exemption up to Rs 10 lakh in gratuity after five years of continuous employment.

An employee who has completed five years of continuous service in an organisation is eligible for gratuity. However, the employee unions in a meeting with labour ministry have demanded some relations to allow gratuity after one year of service, instead of the current cap of five years.

Besides that rate of 15 days wages for each completed year of service be raised to 30 days wages, the unions urged.

This move is expected to be beneficial for most of the private sector employees since a substantial tax outgo would be reduced.

Govt staff won't get family planning and other allowance

The diet, hair cutting, and soap toilet allowances given to select categories of employees have also been abolished.

The Committee on Allowances's seventh Central Pay Commission report, which had examined 196 allowances given to different categories of central government employees, said a separate allowance aimed at population control was not required now and recommended it be abolished.

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