Cabinet approved amendment to the Gratuity Act to raise

the ceiling from Rs 3.5 lakh to Rs 10 lakh

March 5, 2010 in General Info by admin

The Cabinet on Thursday approved an amendment to the Gratuity Act to raise the ceiling from
Rs 3.5 lakh to Rs 10 lakh. The Bill to amend the Act will now go to Parliament, a government
official told.

Every salaried person, who has completed five years of government or private sector service, is
eligible for half a month’s salary as gratuity for every completed year of service. But the gratuity
pay of those with higher salaries is now limited at Rs 3.5 lakh. The proposed amendment raises
this to Rs 10 lakh. Every employer with more than ten salaried workers is mandated to provide
gratuity to the eligible employees. Many companies, however, do not keep the gratuity liability
adequately funded. That is, they make provisions for future payment, but do not set aside funds
towards the future payment. Listed companies are expected to disclose their gratuity liability.

Related Post:-

1. Cabinet approved amendment to the Gratuity Act to raise the ceiling from Rs 3.5 lakh to Rs 10
lakh

2. Lok Sabha passes bill to hike gratuity ceiling to Rs. 10 lakh from Rs. 3.50 Lakh

3. Gratuity Limit increased to 10 Lakh as per Income Tax Act and Gratuity Act in Rajya Sabha

4. Payment of Gratuity (Amendment) Act, 2009 – Amendment in section 2 and insertion of

section 13A, Change in definition of employee

Payment of Gratuity (Amendment) Act, 2009 – Amendment

in section 2 and insertion of section 13A, Change in
definition of employee
January 9, 2010 in General Info by admin

Payment of Gratuity (Amendment) act, 2009 – amendment in section 2 and insertion of

section 13A
An Act to further amend the Payment of Gratuity Act, 1972.

Be it enacted by Parliament in the Sixtieth Year of the Republic of India as follows:—

Short title and commencement

1. (1) This Act may be called the Payment of Gratuity (Amendment) Act, 2009.

(2) It shall be deemed to have come into force on the 3rd day of April, 1997.

2. In the Payment of Gratuity Act, 1972 (39 of 1972) (hereinafter referred to as ‘the principal
Act’), in section 2, for clause (e), the following clause shall be substituted, namely:—

‘(e) “employee” means any person (other than an apprentice) who is employed for wages,
whether the terms of such employment are express or implied, in any kind of work, manual or
otherwise, in or in connection with the work of a factory, mine, oilfield, plantation, port, railway
company, shop or other establishment to which this Act applies, but does not include any such
person who holds a post under the Central Government or a State Government and is governed
by any other Act or by any rules providing for payment of gratuity;’.

3. After section 13 of the principal Act, the following section shall be inserted, namely:—

“13A. Validation of payment of gratuity – Notwithstanding anything contained in any judgment,

decree or order of any court, for the period commencing on and from the 3rd day of April, 1997
and ending on the day on which the Payment of Gratuity (Amendment) Act, 2009, receives the
assent of the President, the gratuity shall be payable to an employee in pursuance of the
notification of the Government of India in the Ministry of Labour and Employment vide number
S.O. 1080, dated the 3rd day of April, 1997 and the said notification shall be valid and shall be
deemed always to have been valid as if the Payment of Gratuity (Amendment) Act, 2009 had
been in force at all material times and the gratuity shall be payable accordingly:

Provided that nothing contained in this section shall extend, or be construed to extend, to affect
any person with any punishment or penalty whatsoever by reason of the non-payment by him of
the gratuity during the period specified in this section which shall become due in pursuance of
the said notification.”.

enforcement of Payment of Gratuity (Amendment) Act, 2010

Notification No. S.O. 1217(E), dated 24-5-2010

In exercise of the powers conferred by sub-section (2) of Section 1 of The Payment of Gratuity
(Amendment) Act, 2010 (15 of 2010), the Central Government hereby appoints the 24th day of May,
2010, as the date on which the said Act shall come into force.

File online ITR-1 or ITR-2 FY 09-10 @Rs 119/-

Gratuity Amount payable under Payment of Gratuity Act enhanced from Rs.3.5 lakhs to Rs 10 lakhs

Payment of Gratuity (Amendment) Act, 2010 (No. 15 of 2010), dated 17-5-2010

An Act further to amend the Payment of Gratuity Act, 1972.

Be it enacted by Parliament in the Sixty-first Year of the Republic of India as follows:-

Short title and commencement.

(1) This Act may be called the Payment of Gratuity (Amendment) Act, 2010.
(2) It shall come into force on such date as the Central Government may, by notification in the Official
Gazette, appoint.
Amendment of section 4 of Act 39 of 1972.

2. In section 4 of the Payment of Gratuity Act, 1972, in sub-section (3), for the words “three lakhs and
fifty thousand rupees”, the words “ten lakh rupees” shall be substituted.

Tax Liabilty on Gratuity

As per Income Tax act ,Section 10(10),employees has been divided in three categorise.

1. Employee of Central/State Government and Local bodies :Gratuity received by these employees
is fully exempted without any limit.
2. Employee covered under Payment of Gratuity Act: Amount received as per Gratuity Act is fully
exempted .Means Income Tax has not defined /set any Limit for such employees.Means as soon
as the amount of Gratuity Act ,enhanced  ,Income tax Limit will also enhanced.As the income
Tax act only refer the Payment of gratuity act .
3. Other employee:For other remaining employee Limit is defined under the Income Tax act ,which
is at present 3,50000.But many PSU ,which is not covered under the Sate or Central Govt
definition as per sr number 1 and 2 above ,has started to pay ,gratuity as per Sixth pay
commission ,maximum up to 10 lakh .So amount in excess of 3.5 lakh is taxable in hand of such
employees .As the Limit is enhanced in Payment of Gratuity Act as per sr number 2 even then
separate notification under this sub clause [10(10)(iii)} is required .The Limit is related to date of
retirement /resignation and not to date of receipt.Update :Govt has enhanced the exemption
limit for person retired after 24.05.2010 read more from here . .
Update 
Exemption from Tax for Gratuity Payments Enhanced from Rs. 3.5 Lakh to Rs. 10 Lakh

Friday, June 11, 2010 18:28 IST

Now PSU employees are getting Gratuity at 10 lakh Rs after tax deduction after Maximum cieling of 3.5
lakh .As the Limit of income tax exemption has been increased in case of Govt employee as well as for
employees covered under payment of Gratuity act ,Limit for PSU employee should also be increased .I
request to All PSU employees to raise their voice against this issue.