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Bill to double tax-free gratuity to Rs 20 lakh likely in Monsoon session, Labour Min to push for Cabinet approval

Formal sector workers would be eligible for up to Rs 20 lakh tax-free gratuity once the amendments to the Act are approved

Edited by: Parimal Peeyush, New Delhi [ Published on: July 10, 2017 12:39 IST ]
Dattatreya said the draft Bill will be placed before Union
Dattatreya said the draft Bill will be placed before Union Cabinet for approvalPhoto:PTI

A bill seeking to double tax-free gratuity ceiling to Rs 20 lakh is likely to be pushed for passage in the upcoming monsoon session of Parliament, beginning July 17, Labour Minister Bandaru Dattatreya has said , adding that it will soon be put before the Union Cabinet for approval. The bill, which will seek to bring amendments to the Payment of Gratuity Act, will also enable the central government to change the ceiling for tax-free gratuity after factoring in rise in income levels by an executive order bypassing Parliament route to amend the law.

"This is on our agenda. It may come in this session (monsoon). It will soon go to the Cabinet for approval," Dattatreya told PTI when asked about the status of Payment of Gratuity Amendment Bill.

Once the amendment in the Act goes through the Parliament, formal sector workers would be eligible for up to Rs 20 lakh tax-free gratuity. Earlier in February, the central trade unions had agreed on the proposal in a tripartite consultation with the Labour ministry.

However, the unions had demanded the removal of conditions asking to have at least 10 employees in an establishment and minimum five years of service for payment of gratuity.

At present, as per the Payment of Gratuity Act, an employee is required to do minimum service of five years to become eligible for gratuity amount. Moreover, the Act applies to those establishments where the number of employees is not less than 10. Trade unions had demanded that the amended provision regarding maximum amount should be made effective from January 1, 2016, as done in the case of central government employees.

Besides, that rate of 15 days wages for each completed year of service be raised to 30 days wages, the unions had said during the tripartite meeting.

The proposed amendment to the Payment of Gratuity Act as circulated by the government only deals with enhancing the ceiling of maximum amount under Section 4(3) of the Act from Rs 10 lakh to Rs 20 lakh.

The proposed amendment is being brought to bring the maximum ceiling amount to Rs 20 lakh in line with the 7th Central Pay Commission's recommendations as accepted by the government.

The relevant amendment for central government employees was notified on July 25, 2016 and the enhanced amount ceiling was made effective from January 1, 2016.

The unions were of the view that the delay of eight months for employees covered under the Payment of Gratuity Act should not result in adversely affecting the interest of the concerned employees.

The employers, as well as state representatives, had also agreed to the proposal of raising the amount of gratuity to Rs 20 lakh in the tripartite meeting held last month.

(With PTI inputs)

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