CA Balwinder Singh
The much waited Social security measure, Payment of Gratuity (Amendment) Bill, 2017 was passed by Rajya Sabha on 22nd March, 2018 after it was passed in the Lok Sabha on 15th March, 2018. On assent by Hon’ble President of India, the same will be made in force by notification in the official gazette.
After 7th Pay Commission was implemented, the ceiling limit of gratuity amount for Central government employees was doubled to Rs. 20 lakh. The Payment of Gratuity (Amendment) Bill gives the central government power to increase the tax free gratuity ceiling from time to time without bringing further amendment bill. The bill has thus paved the way for doubling the ceiling of tax free limit of gratuity to Rs. 20 lakhs as against existing ceiling of Rs. 10 lakhs.
The bill will enable the central government to stipulate the maternity leave period for women employees as deemed to be in continuous service as opposed to current 12 weeks leave period. This change has come in force in the backdrop of Maternity Benefit (Amendment) Act, 2017 increasing the maximum maternity leave period to 26 weeks.
The payment of Gratuity Act, 1972 applies to the followings:
> every factory, mine, oilfield, plantation, port and railway company, shop or establishment in which 10 or more persons are or were employed on any day of the preceding 12 months;
> such other establishments or class of establishments in which 10 or more persons are or were employed on any day of the preceding 12 months as the Central Government may, by notification, specify in this behalf
The employees will be entitled to gratuity only when they have rendered the continuous service of 5 years or more. At present the employees covered under the Act are eligible for maximum tax exemption of Rs. 10 lakhs. Payment of Gratuity (Amendment) Bill has opened the way to central government to specify the tax exemption up to Rs. 20 lakhs.
The gratuity is calculated as follows:
> Gratuity is payable at the rate of 15 days’ last drawn wages by the employee for every completed year of his service or part thereof in excess of 6 months.
> In case of a monthly rated employee, 15 days’ wages shall be calculated by dividing the last drawn monthly wages by 26 and multiplying the quotient by 15.
> In case of a piece-rated employee, daily wages shall be computed on the average of the total wages received by him for a period of 3 months immediately preceding the termination of his employment (without taking into account the wages paid for any overtime work)
The newly brought in amendment bill will go long way to ensure social security. It will not only help the tax payers to avail the maximum exemption but also help women to avail more maternity leave.
(The author can be reached at email@example.com)