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Lok Sabha passes Payment of Gratuity (Amendment) Bill, 2017

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On March 15, 2018, Lok Sabha passed Payment of Gratuity (Amendment) Bill, 2017 which seeks to authorise Central Government to fix tax-free gratuity amount and period of maternity leave with an executive order.

Background information and Salient Features of Gratuity (Amendment) Bill, 2017:

Payment of Gratuity (Amendment) Bill, 2017 was introduced by Labour Minister Santosh Kumar Gangwar in the Lok Sabha during the winter session.

Lok Sabha passes Payment of Gratuity (Amendment) Bill, 2017

  • Under the Payment of Gratuity Act, 1972, formal sector workers with five or more years of service are eligible for maximum Rs. 10 lakh tax-free gratuity after leaving job or at time of superannuation. 
  • After implementation of 7th Central Pay Commission recommendations, ceiling of gratuity amount for central government employees was increased from Rs 10 lakh to Rs 20 lakh.
  • Need to bring in the amendment bill was felt as unions have been demanding for inclusion of this change into the Act.
  • Thus, after passage of Payment of Gratuity (Amendment) Bill, 2017 in Rajya Sabha, Centre may notify tax-free gratuity of Rs 20 lakh for the organised sector.
  • The amendment bill also contains a provision which empowers Central Government to notify the period of maternity leave eligible for qualifying as ‘continuous service’ under the gratuity law.
  • This provision on maternity leave has been included in backdrop of the Maternity Benefit (Amendment) Act, 2017 through which maximum maternity leave period has been enhanced to 26 weeks. 

Quick Facts about Payment of Gratuity Act, 1972:

  • Principle – Employees serving for a long period are entitled to claim a certain amount as retirement benefit
  • Came in to force on – September 16, 1972
  • Applies to – organisations with 10 or more persons
  • Payable to – An employee who has rendered continuous service for not less than 5 years