Union Government has notified the doubling of the limit of tax-free gratuity to Rs 20 lakh in private sector. The notification follows changes in the Payment of Gratuity Act which had empowered the government to fix the ceiling of the retirement benefit through an executive order.
The amendment bill approved by Parliament earlier in the month had also empowered the government to fix the period of maternity leave. Accordingly, the central government has fixed the total period of maternity leave in the case of a female employee to 26 weeks.
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 unions have been demanding for inclusion of the change in the Payment of Gratuity Act.
So far, formal sector workers with five or more years of service are eligible for Rs 10 lakh tax-free gratuity after leaving job or at time of superannuation.
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.
The law is applicable to employees, who have completed at least five years of continuous service in an establishment that has 10 or more persons.
The change with respect to maternity leaves comes against the backdrop of the Maternity Benefit (Amendment) Act, 2017, enhancing the maximum maternity leave period to 26 weeks.
Ministry of Labour has issued their notification revising and increasing the ceiling to Rs. 20 Lakh with effect from 29/03/2018.
Hence, All bank employees and officers retiring from the bank’s service from 29/03/2018, their Gratuity eligibility will be calculated under (i) BPS/OSR (without ceiling) and also under the (ii) amended provisions of the Gratuity Act (with a max. of Rs. 20 lakh) and the higher of the two shall be payable.