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.
