Gratuity of up to Rs 20 lakh soon to be tax-free

New Delhi: Parliament on Thursday passed the Payment of Gratuity (Amendment) Bill 2017, which seeks to double the limit of tax-free gratuity to Rs 20 lakh and empower the government to fix the ceiling of retirement benefits through an executive order. The bill will also empower the government to fix the period of maternity leave.

The bill, passed by Lok Sabha on March 15, was passed by the Rajya Sabha after Chairman M. Venkaiah Naidu held a meeting of leaders of Opposition parties, who had been protesting on various issues, resulting in adjournment of the Upper House.

As all the parties agreed to clear the bill, it was passed through a voice vote without discussion, within four minutes of being moved by Union labour minister Satosh Gangwar.

After the bill was passed, Prime Minister Narendra Modi tweeted: “A significant pro-people measure passed in Parliament. Will benefit lakhs of Indians.”

The bill notifies the period of maternity lea-ve as part of regular service and proposes to empower the Central government to notify the gratuity ceiling from time to time without amending the law.

The labour ministry later said in a statement that the bill envisages amending the provisions related to calculation of regular service for the purpose of gratuity in case of female employees who are on maternity leave from “12 weeks” to such period as may be notified by the Central government from time to time.

After implementation of the 7th Central Pay Commission, the ceiling of tax-free gratuity amount for the Central government employees was increased from Rs 10 lakh to Rs 20 lakh. The labour unions have been demanding inclusion of the change in the Act. At present, formal sector workers with five or more years of service are eligible to Rs 10 lakh tax-free gratuity.

The Payment of Gratuity Act, 1972, was enacted to provide for gratuity payment to employees engaged in factories, mines, oilfields, plantations, ports, railway companies, shops or other establishments.