Now You may get a higher gratuity at the time of leaving the job. The government has relaxed the tax-free limit of the gratuity. As of now, there is not tax on gratuity upto ₹10 lakhs. Thus, employers limit the gratuity payment up to ₹10 lakhs. But now government is increasing this limit up to ₹20 lakhs.
Cabinet Hikes Tax-free Gratuity Limit
On 12/09/2017, the union cabinet has approved the Payment of gratuity bill. This bill containse the provision of tax-free gratuity amount up to ₹20 lakhs. Now the Payment of Gratuity (Amendment) Bill, 2017 would go to the lok sabha and Rajyasabha. I hope that this bill would pass without any obstruction.
“considering the inflation and wage increase even in case of employees engaged in private sector, the Government is of the view that the entitlement of gratuity should be revised for employees who are covered under the Payment of Gratuity Act”
It benefits Private Employees
This relaxation in gratuity would benefit to lakhs of private and PSU employees. These employees are covered by the gratuity act. On the other hand the government employees who are covered under CCD (pension) rules are outside of this act. These are the central and state government employee. The gratuity if such employees is decided with pay commission.
The seventh pay commission has already increased the tax-free gratuity for the government employee. It is up to ₹20 lakhs since 1.1.2016.
What is Gratuity
The gratuity is also a type of social security scheme. According to the law, every employer has to give gratuity to its employee at the time of leaving the job. To get a gratuity the employee must complete 5 years in the service.
The amount of gratuity depends upon the length of the service. 15 day salary is given as gratuity for every year of service. There is a formula to know the gratuity amount. You can also use gratuity calculator to know the amount.
The gratuity amount formula is different for the contract workers.