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Good news for employees: Tax-free gratuity limit may be raised to Rs 20 lakh in Budget 2018

International Business Times (IN) logo International Business Times (IN) 16-01-2018 Nithya Nair

In a move that is expected to provide more benefits to the salaried class, the Payment of Gratuity (Amendment) Bill 2017 is likely to be passed in the Union Budget 2018. The bill proposes to empower the Central government to allow gratuity limits of employees in both the government and private sector to be revised.

Through the bill, the government wants to provide tax-free gratuity of Rs 20 lakh to organised-sector workers at par with the Central government, reported PTI, citing sources.

The bill seeks to allow the government to notify the period of maternity leave and gratuity that can be availed by employees under a Central law.

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At present, employees are paid Rs 10 lakh tax-free gratuity if they have provided five or more years of continuous service at the time of termination.

The bill was introduced in the Lok Sabha in the Winter session of Parliament last month by Labour Minister Santosh Kumar Gangwar. The bill seeks to amend the Payment of Gratuity Act, 1972, and is now expected to be passed in the Budget session, which is scheduled to begin by the end of this month.

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(Slideshow provided by Indian Express)

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.

Employees are eligible for if they have provided at least five years of continuous service at the time of termination. It is mandatory for any employer in the private sector or public sector who has 10 or more employees to pay gratuity to all employees.

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Gratuity is considered a monetary reward for being in service with the company. With respect to gratuity, the amount is calculated on the basis of a formula which is 15 days of wages for each year of completed services, subject to the ceiling of Rs 10 lakh wages for each year of completed services. This current limit was fixed in 2010.

The revision will also allow the Central government to notify the maternity leave period for female employees as deemed to be in continuous service. The maximum maternity leaves that can be availed according to the 1972 Act are 12 weeks.

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(Video provided by Bloomberg)

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