Statutory Compliance

Tax-free limit for gratuity likely to be hiked to Rs 20 lakh

Source | PTI | http://economictimes.indiatimes.com

Formal sector workers may soon be eligible for up to Rs 20 lakh tax-free gratuity as central trade unions have agreed on the proposal in a tripartite consultation with the Labour Ministry.

The central trade unions have agreed on doubling gratuity amount ceiling as an interim measure in a tripartite meeting on the proposed amendment to Payment of Gratuity Act conducted today by the Labour Ministry.

The unions 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.

“While accepting the maximum payment limit of Rs 20 lakh as an interim measure, the unions demanded that the ceilings/ limit with respect to number of employees and years of service should be removed,” the All India Trade Union Congress (AITUC) said in a statement.

It said, “The central trade unions have been urging the government that the ceiling in the amount of gratuity should be removed.”

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.
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