Confused About Gratuity Limits? Clarifying Section 4(3) of the Gratuity Act

Section 4(3) of the Gratuity Act in some books speaks of the maximum ceiling of Rs. 10 lakhs, while in some books, it states that the amount of gratuity payable to an employee shall not exceed 20 months' wages. Which aspect is true?

Dear,

As per the Gratuity Act, there is only one condition: the amount of Gratuity shall not exceed rupees ten lakhs.

Dear CPbanga,

As of now, the ceiling of Gratuity is Rs. 10 lakhs, but the government is considering increasing it to Rs. 20 Lakhs, which will be announced soon through a notification.

Dear Banga, whenever we go through any book on law containing the bare Act and the rules framed under the same, we have to first check the year of publication of the book and next the relevant footnote given under the section to which reference is to be made. Old editions will not have later amendments.

Gratuity Act Amendments

When the Act was enacted in the year 1972, the maximum amount of gratuity payable to an employee under section 4(3) stood at any amount not exceeding twenty months' wages. The Act was subsequently amended in the years 1984 (twice), 1987, 1994, 1998, 2009, and 2010 respectively.

Changes in Maximum Gratuity Amount

The maximum amount of gratuity payable to an employee under section 4(3) of the Act was also raised from time to time as follows:

a) 1984 — From 20 months' wages to Rs. 50,000.00

b) 1994 — From Rs. 50,000/= to Rs. 1,00,000.00

c) 1998 — From Rs. 1,00,000/= to Rs. 3,50,000.00

d) 2010 — From Rs. 3,50,000/= to Rs. 10,00,000.00

Therefore, the current maximum amount of gratuity is Rs. 10 lakh only.