Has the Payment of gratuity amendment bill passed or not?

Has the Payment of gratuity amendment bill passed or not?

Today we discuss about the question that is on everyone’s mind.
And the answer is “Yes”, the Payment of gratuity amendment bill has been passed by the government today.
And that is one big good news for all the employees and workers in the formal sector in India.
Before we talk about the changes in the 2017 bill and what they mean to you, lets understand a few basic facts about Gratuity.

What is Gratuity?

Introduced in 1972, the Gratuity Act provides a scheme for the payment of gratuity to employees engaged in factories, companies, shops and other establishments. Gratuity is tax-free and calculated based on 15 days of wages for each year of continuous and complete service, subject to a ceiling. At present, formal sector workers with five or more years of service are eligible for Rs 10 lakh tax-free gratuity after leaving job or at time of superannuation.

So what are the changes in the 2017 Payment of gratuity amendment bill?

The 2017 bill seeks to amend the Act on two issues:

  1. First, in a women-friendly move, the government increased the period of maternity leave eligible for qualifying as continuous service and determine the amount of gratuity available to employees. The earlier maternity leave limit of 12 weeks has been increased to 26 weeks
  2. Secondly, the Act had introduced a ceiling of Rs. 10 lakh on the maximum amount of gratuity payable to an employee through an amendment in 2010. Keeping the rising cost of living and wage inflation, many employees have made a demand for increasing this limit. This limit has now been enhanced from Rs. 10 lakh to Rs. 20 lakh.

So how do I benefit if Payment of gratuity amendment bill is passed?

  1. First, if you are woman, you can take more maternity leave compared to earlier, without any negative impact on your gratuity benefits.
  2. Second, for both men and women employees, your tax liability on your gratuity amount has decreased. This means more money in your retirement kitty and hopefully a more secure retirement for you.

So when do I get this extra Gratuity money?

This benefit amount is not available to your immediately. Instead it will accrue into your retirement account and will compound till you actually retire or leave the company. So there may not be immediate cashflow benefit if you are a young worker. It is more of a tax exemption on a future benefit.

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