Government Raises Gratuity Limit for Private Employees: How Does This Affect You?

Times of India dated 5th March 2010:

It has been reported that the Government has approved raising the ceiling for payment of Gratuity for Private Employees from Rs. 3.50 Lacs to Rs. 10 Lacs. The decision was taken in a meeting chaired by the Prime Minister on Thursday.

Vasant Nair

We will have to wait for some more time. The Government is planning to introduce a bill in the current session of parliament to amend the Payment of Gratuity Act 1972. Once the bill is passed, the act will be amended, and then it will be applicable.

Arvind

Does this cover the autonomous societies under the administrative control of the various Ministries of the Government of India?

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Dear All,

Please find attached one of the news articles published in Deccan Herald, as referenced by Mr. Vasant.

Regards,
Amit Seth.

It will be effective only when this amendment is forwarded to the president for signature.

Regards,
Jawahar

Thanks for the information. Yes, it is raised, but the same will be placed in the parliament on Monday.

Hi,

Can somebody let me know if there is any change in the formula for the calculation of gratuity in corporates?

Gratuity = Basic * 15 * Number of years served in one organization / 26

If there is any change in the above formula?

Gratuity is calculated under the methodology laid down in the Payment of Gratuity Act. The amount so arrived at, if it exceeds beyond Rs. 3.50 lakhs, the employee will receive Rs. 3.50 lakhs only. If it is less than Rs. 3.50 lakhs, he will receive the actual amount. Now, this ceiling has been raised to Rs. 10 lakhs. The upper ceiling has been revised several times in the past since the Gratuity Act was passed and came into force. For eligibility, calculation, and entitlement, one should go through the details of the Payment of Gratuity Act.

Earlier, gratuity up to 3.5 lakhs was not taxed. Does anyone know if, in the raised limit, income tax for the amount above 3.5 lakhs is applicable?

If any provision in the new amendment for those who do not complete 5 years of service.

AKSHAYSOLANKI

Certainly not because no other change had taken place in the amendment except an increase in the ceiling limit from Rs. 3.50 to Rs. 10.00 lakhs, for which the effective date is yet to be notified in the Government of India Gazette.

Is there any limit on wages for Gratuity calculation?

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There is no spelling or grammar mistakes in the text provided.

We do not find any such limit under the Payment of Gratuity Act, 1972.

R N KHOLA