The Union Cabinet has given approval to the introduction of the Payment of Gratuity (Amendment) Bill, 2017 in the Parliament, which seeks to double tax-free gratuity for private sector and government employees to Rs20 lakh.
Prime Minister Narendra Modi chaired the Union Cabinet meeting.
The present upper ceiling on gratuity amount under the Act is Rs. 10 Lakh. With implementation of 7th Central Pay Commission, in case of Government servants, the ceiling now is Rs. 20 Lakh.
The main purpose for enacting this act is to provide social security to workmen after retirement, whether retirement is a result of the rules of superannuation, or physical disablement or impairment of vital part of the body.
The amendment will increase the maximum limit of gratuity of employees, in the private sector and in Public Sector Undertakings/ Autonomous Organiaations under Government who are not covered under CCS (Pension) Rules, at par with Central Government employees.
The Payment of Gratuity Act, 1972 applies to establishments employing 10 or more persons.
Therefore, considering the inflation and wage increase even in case of employees engaged in private sector, the Government is of the view that the entitlement of gratuity should be revised for employees who are covered under the Payment of Gratuity Act, 1972. Accordingly, the Government initiated the process for amendment to Payment of Gratuity Act, 1972.