The Parliament recently approved the Payment of Gratuity (Amendment) Bill, 2018. The highlight of the Bill is that it will allow the government to raise the limit of tax-free gratuity whenever required, through an executive order. Under the 7th Pay Commission, the ceiling for government employees went up to Rs20 lakh. With the change in the Bill, the government has removed the Rs10 lakh limit, which will benefit private sector employees.
Kulin Patel, head of retirement, South Asia, Willis Towers Watson, said the government has “introduced words that basically say that the central government will now be able to notify a cap as and when required.” This will give them flexibility to change the cap on tax-free gratuity without having to change the primary legislation.
