Finance

Good News! Government announces revision of gratuity limit and gratuity maternity leave

To bring the parity with the government employees, government has announced the revision of gratuity limit for non-government employees, and now it will at par with government employees.

Further government has announced revision in maternity leave from 12 weeks to 26 weeks for calculation of continuous service. It will bring big relief to working women.

These changes will be effective from 29.03.2018 (refer press release below for details)

Gratuity Act states that if an employee, covered under the Act, receives gratuity, the minimum of the following shall be exempted from the tax:

a) Rs 10 lakh; or

b) Actual gratuity received; or

c) Amount of gratuity an employee is eligible to receive, i.e. 15 days salary based on the last drawn salary for each completed year of service or part thereof in excess of six months.

To calculate the amount of gratuity an employee is eligible to receive:

(15 X last drawn salary X years of service) / 26.

In above formula, the last drawn salary means basic salary, dearness allowance, and commission on sales, if any. If the number of months served in the last year of service exceeds 6 months, it is taken as one full year of service for the purpose of calculating years of service.

Press release:

Enhancement of Gratuity Limit

The Government has issued Notification the same day wherein gratuity limit has been increased from Rs.10 lakhs to Rs.20 lakhs under the Payment of Gratuity Act, 1972.

The Government has also issued another Notification on the same day wherein it has also increased the maximum period of maternity leave in case of female employees to be counted as continuous service from 12 weeks to 26 weeks under the Payment of Gratuity Act, 1972.

Representations from various stakeholders have been received in the Ministry. The Ministry had also organised tripartite consultations on 23.02.2017 with all stakeholders including representatives of employers and employees, who supported the proposal. The provision contained in the amended Payment of Gratuity Act, 1972 have been implemented w.e.f. from 29.03.2018.

This information was given by Shri Santosh Kumar Gangwar, Union Minister of State (I/C) for Labour and Employment in written reply to a question in Rajya Sabha today.

JN/IA

(Release ID :178355)

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