There is good news for central employees that after the increase in Dearness Allowance, now the limit of gratuity they get on retirement has increased to Rs 25 lakh. Under this change, which came into effect from January 1, 2024, the amount of gratuity that central employees get on retirement or…
There is good news for central employees that after the increase in Dearness Allowance, now the limit of gratuity they get on retirement has increased to Rs 25 lakh. Under this change, which came into effect from January 1, 2024, the amount of gratuity that central employees get after retirement or death has increased from Rs 20 lakh to Rs 25 lakh. This amount is completely tax-free, that is, these employees do not have to pay any tax on this amount.
At the same time, the limit of tax-free gratuity for employees working in the private sector is still only Rs 20 lakh. This new system was announced by the Department of Pension and Pensioners Welfare under the Ministry of Personnel, Public Grievances and Pensions through an office memorandum. It was told that this change has been implemented on the basis of the recommendations of the Seventh Pay Commission, due to which the maximum limit of gratuity on retirement and death has increased by 25 percent.
Gratuity is considered a type of honorarium, which is given to an employee in return for his services on retirement or leaving the company. This amount is a part of the monthly salary of the employee, but it is not given regularly. Employees receive it in lump sum on leaving the company or in other circumstances.
Gratuity is calculated on the basis of the employee’s salary. For this, the employee has to serve continuously for at least 5 years. However, this rule does not apply if the employee dies or becomes disabled. Apart from this, recently the trade unions have demanded the Finance Minister to change the rules of gratuity calculation, so that employees can get more gratuity on retirement. They have also requested the Finance Minister to make one month’s salary the basis for gratuity calculation, not 15 days’ salary.
