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Payment of Gratuity (Amendment) Bill, 2017 to double tax-free gratuity to Rs 20 lakh
HRKatha News Bureau | Bangalore | Thursday, 14 September 2017

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The maximum limit of gratuity for private-sector employees, who are covered under the Payment of Gratuity Act, 1972, also increased

The Central Government has given its approval for the introduction of the Payment of Gratuity (Amendment) Bill, 2017 in the Parliament. The Bill will double the tax-free gratuity to Rs 20 lakh from the current upper ceiling of Rs 10 lakh for the employees of the formal sector.

The Gratuity Act is a key social-security legislation for the wage earners in industries, factories and other establishments.

The Payment of Gratuity (Amendment) Bill, 2017 will put the maximum limit of gratuity of employees of the private sector as well as the public undertakings and autonomous organisations, which come under government regulation and are not covered under the Central Civil Services (Pensions) Rules. The maximum limit is Rs 20 lakh, which is at par with the Central-Government employees.

As per the CCS (Pension) Rules of 1972 the maximum ceiling was fixed at Rs 10 lakh, but after the implementation of the 7th Pay Commission, the new ceiling will be Rs 20 lakh, which is effective from January 1, 2016.

The Government decided to increase the maximum limit of gratuity for private-sector employees also, who are covered under the Payment of Gratuity Act, 1972. The Act is applicable to firms employing 10 or more persons.

The main reason for this amendment is to provide social-security benefits to employees, who retire due to rules of superannuation or physical disablement or impairment of vital parts of the body. The increase in inflation and wages was also factored in while making this decision.

© 2016 HR Katha


  • Comment Link Yogesh HK Monday, 13 November 2017 posted by Yogesh HK

    Is the Rs.2000000 limit is made compulsory for all private sector staff? Also, please let me know by when the new law related to the increase in gratuity to private sector will be applicable.

  • Comment Link Yogesh Thursday, 09 November 2017 posted by Yogesh

    I have retired from Central PSU as an executive drawing salary of Rs 104000/- PM (Basic+DA) on 30.06.2016. I received Rs.1000000/- as gratuity. I wish to understand that am I entitled more of amount of increased gratuity if yes, to what amount. Kindly clear my dilemma of mind.



    Respected Sir
    I am retired from Govt of Maharashtra undertaking Corporation in the month of July 2016. I have got gratuity of Rs. 10.00 lakhs even I was entitled for about Rs. 16.00 lakhs whether the notification from Public undertaking corporations are already issued or yet to be issued please confirm.
    With kind regards

  • Comment Link IQBAL INDER ARORA Tuesday, 24 October 2017 posted by IQBAL INDER ARORA

    I retired from Bank as Chief Manager on 30.06.2016
    I was paid gratuity as per old rules i.e.Rs1250000
    Please let me know the effective date of increase
    whether i am eligible for arrears from 01.01.2016
    against my entitlement of Rs20 lakh. I put in service for 39 years 1 month

  • Comment Link cv naik Monday, 23 October 2017 posted by cv naik

    the Gratuity amount for Government employees has been increased to Rs.20 lakhs wef from Jan 2016. However, for employees of Private companies there has been no clear information for the effective date though Hon PM has given approval. One has to wait for the amendment bill that will get passed.

  • Comment Link Daljit Singh Sohal Monday, 23 October 2017 posted by Daljit Singh Sohal

    whether the proposed amendment in the Payment of Gratuity Act is effective from 01.01.2016 or from the date of notification.

  • Comment Link G.VENKATATESWARARAO Monday, 09 October 2017 posted by G.VENKATATESWARARAO

    Dear sir,
    I want clear information , i.e. I am retired from a Major Port Trust in the month of August 2016, and My Basic Pay + D.A. = 72500 after completion of 38 years 7 months so, how much i have to eligible to get In this connection I have already received Rs.1000000/- I hope that I am also eligible to get the balance amount as arrears. please confirm.

  • Comment Link S.b.kadur Tuesday, 03 October 2017 posted by S.b.kadur

    Effective date of gratuity limit increase to private sector employees

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