The Parliament passed Payment of Gratuity (Amendment) Bill, 2017,paving the way for doubling the limit of tax free gratuity to Rs 20 lakh and empowering the government to fix the ceiling of the retirement benefit through an executive order.

The Rajya Sabha passed the Bill, which was approved by the Lok Sabha last week, on March 15.The Bill ensures harmony amongst employees in the Private sector and Public Sector Undertakings and the Autonomous Organizations under government who are not covered under Central Civil Services (Pension) Rules, 1972.

The employees will be entitled to receive higher amount of gratuity on a par with their counterparts in government sector. It also envisages to amend the provisions relating to calculation of continuous service for the purpose of gratuity in case of female employees who are on maternity leave from twelve weeks to such period as may be notified by the Central Government from time to time.

The Bill was necessitated to tide over the anomalies surfacing in implementation of Payment of Gratuity Act, 1972, in light the 7th Central Pay Commission’s recommendations.

The Act is a social security law for benefit of wage earning population in industries, factories and establishments, and applies to establishments employing 10 or more persons.

The present upper ceiling on gratuity amount under the Act is Rs 10 lakh.
The provisions for Central Government employees under CCS (Pension) Rules with regard to gratuity are also similar. Before implementation of 7th Central Pay Commission, the ceiling under the rules was Rs 10 lakh. However, the ceiling with regard government servants was raised to Rs 20 lakh in implementation of the Commission’s recommendation.

Against the backdrop of inflation and wage increase even in case of
employees engaged in private sector, there had demand from wide-ranging quarters for revision in entitlement of gratuity with regard employees who are covered under the Act.