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.