Tax – Free limit for gratuity hiked to Rs.20 lakh
Deepak Saxena
Counsel l Arbitrator l Insolvency Professional l Speaker l Managing Partner & Lawyer at Legal Prism
Formal sector workers may soon be eligible for up to Rs 20 lakh tax-free gratuity as central trade unions have agreed on the proposal in a tripartite consultation with the Labour Ministry.
The All India Trade Union Congress (AITUC) have confirmed that Government vide their letter dated February 15, 2017 has accepted the proposal for amendment to the Payment of Gratuity Act to enhance the ceiling of maximum amount under Section 4(3) of the Act from Rs 10 lakh to Rs 20 lakh.
Unions have also demanded that application of amended provision regarding maximum amount should be made effective from January 1, 2016 as done in the case of central government employees.
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.
Unions have also demanded that rate of 15 days wages for each completed year of service be raised to 30 days wages.
The unions have also 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.