The Lok Sabha passed a bill that seeks to increase the maximum limit of the gratuity of employees in the private and public sector from the present Rs 10 lakh to Rs 20 lakh. This bill is now referred to Rajya Sabha for their approval and later on, it will be notified by the Government once President gives assent.

Effect: The bill empowers the Central Government to notify the proposed ceiling so that the limit can be revised from time to time keeping in view the increase in wage and inflation, and future Pay Commissions without having to amend the Act, by substituting the words “Ten Lakh Rupees” in Section 4 with the words “such amount as may be notified by the Central Government from time to time”.

Ceiling/Quantum – Now, with this Amendment, Govt. can notify any amount as the ceiling.  This is an omnibus amendment.  No need to go to Parliament at all in future seeking quantum/ceiling increase. Statement of Objects & Reasons (SO&R) submitted to Lok Sabha indicates that the Gratuity Ceiling is likely to be in line with Central Govt (presently Rs.20 Lakhs).

It also seeks to amend Section 2A of the Act so as to empower the government to notify the period of maternity leave in case of the female employee as deemed to be in continuous service in place of existing twelve weeks.

This has been necessitated as maximum maternity leave, for the purpose of calculating continuous service under the Act, was based on the maternity leave provided under the Maternity Benefit Act, 1961, but extended from 12 weeks to 26 weeks by the Maternity Benefit (Amendment) Act, 2017.

How Gratuity is calculated:

15 days last drawn salary × years of service. (Salary*(15/26)* years of service)

The maximum amount specified, i.e., Rs. 20,00,000* (expected in Notification) Also, least of these is tax-free as per Section 10 (ii) of IT Act

The remarkable achievement is that no bill needs to be moved before Parliament henceforth.  A Govt. Notification is enough.