Budget 2018: Tax Free Gratuity Limit Likely to be Doubled as Recommended by 7th Central Pay Commission For Central Government Employees

After implementation of the 7th Central Pay Commission, the ceiling of gratuity amount for central government employees was increased from Rs 10 lakh to Rs 20 lakh.

New Delhi, Jan 15: The Union government may make the formal sector workers eligible for a tax free gratuity of Rs 20 lakh, reports said. Currently, workers are eligible to get gratuity upto Rs 10 lakh totally tax free. This means that the tax exemption limit might be doubled in Budget Session 2018.

Payment of Gratuity Amendment Bill 2017 is likely to be passed in the upcoming Budget session. A source told a news agency  that the bill is likely to be passed as the government wanted to provide tax free gratuity of Rs 20 lakh at par with Central government employees.

The bill was introduced in the Lok Sabha in the prevision session of Parliament. The bill also deaks with the maternity leave.  The amendment will also allow the central government to notify the maternity leave period for “female employees as deemed to be in continuous service in place of existing twelve weeks”. The proposal comes against the backdrop of the Maternity Benefit (Amendment) Act, 2017 enhancing the maximum maternity leave period to 26 weeks, PTI reported.

Gratuity is the payout made to employees who complete five years of service in a company. It is calculated using a formula that entails 15 days of wages yearly. There is a ceiling for Rs 10 lakh, which was fixed in 2010. After implementation of the 7th Central Pay Commission, the ceiling of gratuity amount for central government employees was increased from Rs 10 lakh to Rs 20 lakh.

(Agencies)