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Posted at: Sep 13, 2017, 1:28 AM; last updated: Sep 13, 2017, 3:48 PM (IST)

Centre decides to raise gratuity tax cap to Rs 20 lakh

1% hike in DA

  • The Union Cabinet on Tuesday raised by 1 per cent dearness allowance for its staff anddearness relief to pensioners
  • “Release of additional instalment of DA is an increase of 1 per cent over the existing rate of 4 per cent of the basic pay/pension,” an official statement said
  • The decision was taken at a meeting chaired by PM. The new rate, applicable from July 1, will benefit nearly 49.26 lakh employees and 61.17 lakh pensioners
  • The impact on the exchequer on account of both DA and DR will be Rs 3,068.26 crore per annum and Rs 2,045.50 crore in the financial year 2017-18 (July 2017 to February 2018)
Centre decides to raise gratuity tax cap to Rs 20 lakh
Thinkstock photo for representation only.

New Delhi, September 12

The Centre today approved an amendment Bill to double tax-free gratuity for formal sector employees to Rs 20 lakh.

“The Union Cabinet chaired by Prime Minister Narendra Modi has given its approval to introduction of the Payment of Gratuity (Amendment) Bill, 2017, in Parliament,” an official statement said.

The amendment will put the maximum limit of gratuity for employees of the private sector, public undertakings and autonomous organisations under the government who are not covered under Central Civil Services (Pension) Rules, on a par with Union Government employees at Rs 20 lakh.

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The current upper ceiling on gratuity under the Act is Rs 10 lakh. The provisions for Central Government employees under the Central Civil Services (Pension) Rules, 1972, with regard to gratuity are also similar.

Before the implementation of the 7th Central Pay Commission, the ceiling under the CCS (Pension) Rules, 1972, was Rs 10 lakh.

Considering inflation and wage increase even in case of employees engaged in the private sector, the government is of the view that the entitlement of gratuity should be revised for staff covered under the Payment of Gratuity Act, 1972. Accordingly, it initiated the process for amendment to the Gratuity Act that applies to establishments employing 10 or more persons.

The main purpose for enacting this Act is to provide social security to workmen after retirement, whether due to superannuation, physical disablement or impairment of vital body parts.

Therefore, the Gratuity Act serves as a key social-security legislation to wage-earners in industries, factories and establishments. — PTI


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