Gratuity Limit revised – Latest Amendment in Gratuity Act – 2017

The center has approved an amendment bill for Payment of Gratuity Act, that doubles the amount of tax-free gratuity limit.

As per the official statement released on 12th Sep 2017 – “The Union Cabinet chaired by Prime Minister Narendra Modi has given its approval to introduction of the Payment of Gratuity (Amendment) Bill, 2017, in Parliament.”

Revised Gratuity Limit

The revised Gratuity limit as per the above specified bill is Rs. 20 Lakhs. The previous upper ceiling of gratuity was Rs. 10 Lacs. The revision has been done in view of the inflation and the increase in wages.
in case of Central Government employees,  the ceiling  was already increased to Rs. 20 Lakhs effective from 1.1.2016, with implementation of 7th Central Pay Commission. With th is amendment, the ceiling has got increased to Rs. 20 Lacs for employees in the private sector and in Public Sector Undertakings also.
All other provisions of Payment of Gratuity Act, 1972 remains the same.

Overview of Payment of Gratuity Act, 1972

Payment of Gratuity Act is social security legislature. Gratuity is payable to an employee at the end of his employment after he has rendered continuous service for not less than five years –

(a) on his superannuation, or
(b) on his retirement or resignation,
(c) on his death or disablement due to accident or disease , even if five years are not completed.

The amount is payable to the family of the employee in case of death of the employee during employment.
You can download the payment of gratuity Act, 1972 from the below link –

Calculation of Gratuity

The calculation of gratuity is on the basis of number of years of completed service. For every completed year, 15 days salary is paid to the separating employee. For example, if an employee has completed 10 years of service at the time of separation from the company, he will be paid salary of 150 days ( 15 days x 10  years ) as Gratuity.
If the total amount exceeds Rs. 20 Lacs as per this calculation, the actual payable amount will be limited to Rs. 20 Lacs only as the latest amendment bill of the gratuity act has set the revised ceiling of Rs. 20 Lakh.
If you have any queries regarding Gratuity, you can post it in the comments section below.

3 Comments Add yours

  1. The procedure of 20 moths wages for payment of gratuity is in force or not. if any amendments please inform the same. my corporation is paying 20 months wages instead of 40 years service. I am loosing nearly 2 lacks in the pattern.

    1. hrlaptop says:

      Hi Mr. Rao, the govt. had issued the last notification specifying the maximum limit of gratuity to Rs. 20 Lacs.
      The company should not deny you the calculated amount if it is less than Rs. 20 Lacs. Although, they are free to provide better terms of gratuity and can pay more.

  2. Sir, thank you for your good information. The management is say that Board members have resolve the rule of 20 months basis pay in 2012 i.e. 16.11.2012. Now the APSRTC is implementing w.e.f. 08.01.2018.
    The officers are receiving gratuity more than 20 lakhs and some of the officers are receiving Rs. 50 to 1 crore without any restriction. Now they implementing the 20 months pay + DA formula. I am getting gratuity 11 lakhs instead of 13 lakhs on my 40 years service. i.e. 2 lakhs loss. and furnish latest amendments and court judgements to proceed further in this regard.

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