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Bill To Double Tax-Free Gratuity To Rs 20 Lakh Likely In Monsoon Session


Labour Minister Bandaru Dattatreya has said the bill which seeks to double the tax-free gratuity ceiling to Rs. 20 lakh is likely to be pushed for passage in the upcoming monsoon session of Parliament, beginning July 17. Besides, the bill to amend the Payment of Gratuity Act also seeks to enable the central government to change the ceiling for tax-free gratuity after factoring in the rise in income levels by an executive order bypassing Parliament route to amend the law. The draft bill, however, is yet to be scrutinized and approved by the Union Cabinet.


"This is on our agenda. It may come in this session (monsoon). It will soon go to the Cabinet for approval," Mr. Dattatreya told news agency Press Trust of India when asked about the status of Payment of Gratuity Amendment Bill.

Bill To Double Tax-Free Gratuity To Rs 20 Lakh Likely In Monsoon Session

After the amendment in the Act, formal sector workers would be eligible for up to Rs. 20 lakh tax-free gratuity. Earlier in February, the central trade unions had agreed on the proposal in a tripartite consultation with the labour ministry.

However, the unions had demanded the removal of conditions asking to have at least 10 employees in an establishment and minimum five years of service for payment of gratuity.


At present, as per the Payment of Gratuity Act, an employee is required to do minimum service of five years to become eligible for gratuity amount. Moreover, the Act applies to those establishments where the number of employees is not less than 10.

Trade unions had demanded that the amended provision regarding maximum amount should be made effective from January 1, 2016, as done in the case of central government employees.

Besides, that rate of 15 days wages for each completed year of service be raised to 30 days wages, the unions had said during the tripartite meeting.

The proposed amendment to the Payment of Gratuity Act as circulated by the government only deals with enhancing the ceiling of the maximum amount under Section 4(3) of the Act from Rs. 10 lakh to Rs. 20 lakh.

The proposed amendment is being brought to bring the maximum ceiling amount to Rs. 20 lakh in line with the 7th Central Pay Commission's recommendations as accepted by the government. The relevant amendment for central government employees was notified on July 25, 2016, and the enhanced amount ceiling was made effective from January 1, 2016.

The unions were of the view that the delay of eight months for employees covered under the Payment of Gratuity Act should not result in adversely affecting the interest of the concerned employees. The employers, as well as state representatives, had also agreed to the proposal of raising the amount of gratuity to Rs. 20 lakh in the tripartite meeting held last month.

Read more about: gratuity tax free
Story first published: Monday, July 10, 2017, 12:08 [IST]
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