Lok Sabha Passes Gratuity Bill (Important) (Download PDF)

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The Lok Sabha passed the Payment of Gratuity (Amendment) bill which seeks to empower the government to fix period of maternity leave and tax-free gratuity amount with an executive order.

Image of Lok Sabha Passes Gratuity Bill

Image of Lok Sabha Passes Gratuity Bill

Image of Lok Sabha Passes Gratuity Bill

  • Changes in the BillAfter the passage of the Payment of Gratuity (Amendment) Bill in, the government would be able to enhance the ceiling of tax-free gratuity to Rs. 20 lakh from existing Rs. 10 lakh for employee under the Payment of Gratuity Act.

  • After implementation of the seventh Central Pay Commission, the ceiling of gratuity amount for central government employees was increased from Rs. 10 lakh to Rs. 20 lakh. The unions are demanding for inclusion of the change into the Act.

  • The bill notifies the period of maternity leave as part of continuous service and proposes to empower the central government to notify the gratuity ceiling from time to time without amending the law.

Payment of Gratuity Act, 1972

  • The Payment of Gratuity Act, 1972, was enacted to provide for gratuity payment to employees engaged in factories, mines, oilfields, plantations, ports, railway companies, shops or other establishments.

Bill before the Changes

  • 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.

  • The government wants to provide tax-free gratuity of Rs. 20 lakh to organised sector workers at par with the central government.

  • The amendment will also allow the central government to notify the maternity leave period for “female employees as deemed to be in continuous service in place of existing twelve weeks”.

  • The proposal comes against the backdrop of the Maternity Benefit (Amendment) Act, 2017 enhancing the maximum maternity leave period to 26 weeks.

  • The law is applicable to employees, who have completed at least five years of continuous service in an establishment that has 10 or more persons.

- Published/Last Modified on: June 29, 2018

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