Gratuity Limit Update: Has It Really Increased from 3.5 Lakh to 10 Lakh?

Dear members, I want to know what the current Gratuity limit or ceiling is. Has the Gratuity limit been raised from 3.5 lakh to 10 lakh?

The gratuity limit has been raised from 3.5 lakh to 10 lakh.

The Labour Ministry, in its pre-Budget consultation with the Finance Ministry, had proposed to raise the Income Tax exemption limit for gratuity funds up to Rs 10 lakh for both government and private employees. The Sixth Pay Commission, in its report, had recommended hiking the ceiling of Rs 3.5 lakh on gratuity funds to Rs 10 lakh for government employees.

Thank you.

I have heard that gratuity is now to be paid for 30 days instead of the 15 days that were previously paid. It seems this amendment was made in the year 2012. Kindly let me know.

Gratuity Amendment Update

The gratuity amendment to Rs 10 lakh and the 30 days payment are both proposed bills. They have not yet been passed or notified by the government.

Gratuity Limit Update

The maximum amount of gratuity has been raised from Rs. 3.5 lakh to Rs. 10 lakh with effect from 24-05-2010.

I would appreciate it if the members of the forum, before responding to anything, confirm the facts with evidence. Kuldeep ji has posted the evidence of the Gratuity 10 lakh amendment, but still, some members confidently say that it is still a bill. Both questions, the gratuity 10 lakh amendment and the gratuity 30 days bill, have been answered earlier in many threads. There should be no doubt in anybody's mind. My intention is not to hurt anyone. We have so many experts, but they do not participate in discussions since they feel their views are disregarded. This is the feedback I have received from a few members. My humble request to members is not to take it the other way around.

I am not able to understand your point. Do you mean to say that the ceiling of gratuity being raised to Rs. 10 lakh is not correct, or that the number of days to be taken into account has been raised from 15 to 30 days is correct? Please clarify.

I appreciated the reply of Kuldeep ji, and I also appreciated your reply. I fully endorse both of you. My concern is that when Kuldeep ji provided the notification of the amendment, it clarified that it is no longer just a proposal. Someone mentioned it after Kuldeep ji's post, which prompted me to respond. Gratuity for 30 days is a private bill. Both issues have been discussed in this forum many times before. I hope I have made it clear now.

With due respect to you, Sir.

Greetings of the day to you as well as all the viewers. Please find attached a PDF of a private bill introduced in the Rajya Sabha on 23.11.2012 by one of the members of Parliament, for your information and ready reference. The chances of passing this bill are nearly ZERO.

I appreciate your postings and expect that you will have more and more discussions in this forum, which will be valuable, fruitful, and a guiding light to a person like me.

You are correct in stating that the 30 days payment is a proposed bill. This bill is a private bill introduced by one of the members of Parliament and not by the Government. Such a bill, i.e., a bill introduced not by the Government, is called a 'Private Bill'.

Regarding the Gratuity amendment to Rs. 10 lac, the bill has been passed, and now there is a law. Please find attached a Gazette Notification to this effect, for your information and ready reference.

Regards

Dear Mr. Korgaonkar, I appreciate your immediate and sincere response with a copy of the proposed bill, and thank you very much. Barring the Working Journalists (Conditions of Service & Miscellaneous Provisions) Act, 1955, there were no labor legislations incorporating gratuity as one of the service conditions, though the matter was receiving the attention of the Government of India as early as 1943, with a recommendation in this regard given by the Labor Investigation Committee. As usual, only the states of Kerala and West Bengal became the forerunners and passed their own State's Acts of Gratuity respectively in 1970 and 1971. Other states also seriously started to have their own laws on the subject. So, a compulsion for a common law applicable throughout the country arose, and the Central Government enacted this law in 1972.

Initially, the Act covered only those employees drawing wages (only basic + dearness allowance) up to Rs 750/= per month in factories, plantations, shops, establishments, and mines. The quantum of gratuity payable was fixed at 15 days of the last drawn wages. The maximum amount of gratuity was limited to 20 months of wages. Since then, the Act has been amended seven times in 1984, 1987, 1994, 1998, 2009, and 2010, incorporating periodic and drastic changes and modifications in its coverage, applicability, definition clauses, ceilings, etc.

Though I am as skeptical as you are about the bill's metamorphosis, it is a welcome effort by a people's representative, and if it comes to fruition, it will be of immense benefit to the working masses considering the galloping inflationary trend in the cost of living and changes in lifestyle.

Gratuity Limit and Tax Implications

The limit of Gratuity is ₹10 lakhs. However, there is no restriction if the company wants to pay a higher amount as Gratuity to its employees. In such a case, the Income Tax benefit shall be restricted to ₹10 lakhs only, and the balance amount shall be taxable in the hands of the employee.

Proposed Amendment on Gratuity Calculation

Further, the status of the proposed amendment to increase the calculation basis from 15 days to 30 days is still a proposal and has not yet been passed.