The Ministry of Labour and Employment has clarified that the enhanced limit of gratuity for the private sector workers will be effective from March 29, 2018, only, in a notification issued on its website. The government in March had notified doubling of the limit of tax-free gratuity to Rs. 20 lakh in the private sector. The Payment of (Gratuity) Amendment Bill, 2018 was passed by the Lok Sabha and Rajya Sabha and received assent from the President on March 28, 2018.
After implementation of the Seventh Pay Commission, central government employees had not just received salary raises but the amount of their tax-free gratuity had also been doubled to Rs. 20 lakh from Rs. 10 lakh. The passage of the amendment bill paved way for private sector employees to avail tax-free gratuity up to Rs. 20 lakh, as well.
The ministry received a large number of representations from unions/organisations/individuals, through social media websites and PG (public grievance) portal whereby they requested the ministry that the effective date of Payment of Gratuity (Amendment) Act 2018 should be January 1, 2016, instead of March 29, 2018, at par with the central government employees, further said the notification.
Implementation of the enhanced gratuity ceiling with retrospective effect would have been administratively difficult and employers may not have sufficient liquidity to meet the arrears liabilities, said the Santosh Gangwar-led ministry.
The Payment of Gratuity Act, 1972 is applicable to employees who have completed at least five years of continuous service in an establishment of 10 or more persons.