RSTV Policy Watch – Payment of Gratuity (Amendment) 2018

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Introduction :-

In the huge benefit to millions of private sector employees parliament simply approved payment of gratuity amendment bill 2018 after implementation of 7th pay commission central govt employees have just not received salary raises but the amount of their tax free gratuity had also been doubled to 20 lac from 10 lac.

However the Passage of payment of Gratuity Amendment bill 2018 has paved a way for private employees to avail the tax free gratuity upto 20 lac rupees.


What is Gratuity & how does it benefit the people ?

The payment of gratuity had come in 1972, applicable to mines, factories, plantations, oil fields, ports, railways or shop & other establishments . As per the law any employee who has completed 5 years of continuous service at the time of the termination of employment maybe because of administration or voluntary resignation or any other reason. He/she is entitled to get gratuity at the rate of 15 days wage for each completed year in a service.

What is Continuous employment ?

Any employee who is on the leave, any kind of the leave is treated as a continuous employment except when there is a break in service. Continuous employment doesn’t mean the physically employees attending everyday.

Features of new bill :-

  • Facilities that was earlier available to govt employees or employees of govt bodies has now been extended to private sector employees who are covered under the gratuity act.
  • Tax Exemption upto 20 lacs gratuity.
  • Rules had been changed, that for the next time uh need to revise that tax applicability limit for gratuity beyond 20 lacs in keeping with the inflation rate you dont have to go back to parliament and amend it. The law has been amended to make sure that the rules can be framed by the central govt appropriately to raise this limit.

Centre Authority :- 

  • Ceiling of Gratuity :-
    Ceiling amount of gratuity has remained same on 10 lacs therefore employer is not liable to pay more than 10 lacs till now but the power has been given to Central govt that by issuing a notification they can decide the ceiling of gratuity from time to time with respect to wages or inflation etc.
  • Maternity Leaves :-
    Women who are on maternity leave, present law states 12 weeks, if she is on the maternity leave for 12 weeks, these weeks will be counted as continuous employment for the eligibility. But now Maternity Act has been amended, even after the effect from 2017 , enhancing the maternity leave from 12 weeks to 26 weeks. Therefore in this prospect too, Central govt has power to notify that what will be the maximum limit of maternity leave which will be considered as continuous employment for women worker.

Benefits :- 

  • First, Private sector Employees & Govt employees will now by law, no employer can deny a gratuity above 10 lac. They can claim it up to 20 lac.
  • Second, The tax liability on above 10 lac & upto 20 lac will stay zero.
  • Third, The women employees who earlier use to go away on pregnancy leave or maternity leaves will now get a benefit because that leaves will not be counted while calculation of gratuity.
  • Fourth, The govt has recently come out with the Fixed Term Employment scheme under which companies can have an employees on a fixed term. Now those employees being under the fixed term will also be entitled to gratuity. Even if they don’t complete the minimum no. of years of 5 years under the Fixed Term Scheme. They will be entitled to get the benefits of gratuity benefits.




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