Enhancement of Gratuity limit up tp 10 lakh

[CHANDRA MOHAN]

Dear All ;

FYI.

Enhancement of Gratuity limit up to Rs 10 lakh

Date:- 5th March 2010

In a major relief to salaried class in the private sector, the government
on Thursday cleared a proposal to raise the Income Tax (I-T) ceiling for
payment of gratuity from the existing limit of Rs 3.5 lakh to Rs 10 lakh.
This decision was taken at a Cabinet meeting chaired by the Prime Minister.
"The Cabinet decided to amend the Payment of Gratuity Act, 1972 to enhance
the gratuity limit for employees working in the private sector with no tax
liability," highly placed sources told Deccan Herald, which had earlier
reported about the move. This decision of the Cabinet will bring parity
between government and private sector employees in enjoying equal gratuity
benefits. The government will introduce the necessary legislation for
amending the Payment of Gratuity Act to enhance the gratuity limit during
the ongoing Budget session of Parliament, sources said. The Labour Ministry
in its pre-Budget consultation with the Finance Ministry had proposed to
raise the Income Tax exemption limit for gratuity funds up to Rs 10 lakh
for both government as well as private employees. The Sixth Pay Commission
in its report had recommended hiking the ceiling of Rs 3.5 lakh on gratuity
funds to Rs 10 lakh for government employees. The Labour Ministry floated
the idea of extending similar benefit for the employees working in private
sector. Before sending its pre-Budget recommendations to the Finance
Ministry, the Labour Ministry had sought the views of apex chambers of
trade and industry as well as trade unions on the issue of hiking the
ceiling on gratuity funds for private sector employees. Apart from Trade
Unions, who are otherwise expected to welcome the proposal, apex chambers
of trade and industry representing the employers side too have welcomed the
Labour Ministry’s proposal to raise ceiling for gratuity funds. The
FICCI–the leading chamber of trade and industry–in its note submitted to
the Labour Ministry is understood to have pointed out that enhancement of
ceiling on gratuity fund would also translate into increase in entitlement
of the employee in most cases.