Gratuity Limit Increased To Rs. 20 Lakh: What It Means For You?

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Gratuity limit for employees serving both in the private or public sector has been increased to Rs. 20 lakh from the erstwhile Rs. 10 lakhs. It should be noted that the rule shall come in force after receiving parliamentary approval. Know what does the new rule changes for you.

Gratuity Limit Increased To Rs. 20 Lakh: What It Means For You?

So, with eligibility for higher gratuity, the new ruling will provide parity in line with gratuity amount payable to central government employees covered under the Central Civil Services (Pensions) rules.

Gratuity is payable to employees serving in organizations with a strength of over 10 employees and further for you to be eligible to receive the amount you shall serve in the company for a continuous period of 5 years.

Gratuity Calculation

For every year of service, the employer has to pay an amount equivalent to 15 days of salary that is last drawn. Salary here includes basic salary + DA+ Commission if any\
With the maximum ceiling limit enhancement per se gratuity amount payable, taxation benefit would also increase.

For government employees, the amount received as gratuity is total exempt from income tax while for others it is charged under the head income from salary. Nonetheless based on some of the factors it can be tax exempt u/s 10(10)D of the Income Tax Act 1961. So, in case gratuity is payable then either of the three; Rs. 10 lakh, actual gratuity received or 15 days last salary drawn * no. of service years, shall be exempt.

Goodreturns.in

Read more about: gratuity, employees, basic salary
Story first published: Tuesday, September 19, 2017, 12:50 [IST]
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