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.


  1. I retired from service on 31st Dec.2017, but not recevied the grautity
    My question is new Amendment will be from date of retirement or date of receiving the grautity if it is 29th March it is applicable to all who retired in year 17- 18

  2. Govt assured the labour unions to give the effect from 01.01.2016 at par with central govt employees while initiated for ammendment. Now the govt did not honour their assurance and make the ammendment effective from the date of notification. Its clearly cheats the psu employees and a unfair discrimination. In previous cases the ammendment of gratuity made effective with retrospective date i.e in 2009 with effect from 1997.Why not the same is done this time? This would give a jolt to ruling party in next general election 2019.

    • Yes, it’s clearly a cheat on the part of Central unions. Government delayed 2 years or more to pass the gratuity bill just to cheat large number of employees in the psu. Unions make us fool. It is the union who is primarily responsible for the plight of the retired.

    • It shows the attitude of the Govt that means policy makers are also cheated the PSU Employees as they only advice these politicians and otherwise they’re Zero. They’re well aware that Gratuity Order is same for all. Everyone is eligible for gratuity of RS.20 lakhs as per Gratuity Act. 1972, which clearly mentioned the same. Now how this Gratuity Amendment Act.

  3. Now it is clear that PSU has no role in nation building, as Govt is taking a step motherly attitude towards PSU. Only Central Govt. employees have a lion’ share in every thing. For whose fault it was delayed to 29/3/2018 . Such discrimination is not justified.

  4. The increased gratuity effective date must be w.e.f 01.01.2016 for all PSUs/Private as done for central govt.As it was previously same for all.

  5. The increased graduity must be wef 01.01.2016..Or else it will be treated as inustice on the bank employees …Who have contributed to the development of the economy through financial services…Govt should do something about this

  6. Yes, it’s clearly a cheat on the part of Central unions. Government delayed 2 years or more to pass the gratuity bill just to cheat large number of employees in the Public sector. Unions make us fool. It is the union who is primarily responsible.


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