Gratuity Upto Rs.20 Lakh to be Exempted From Income Tax

By | March 20, 2017
(Last Updated On: March 20, 2017)

Private-sector employees will soon be able to withdraw up to Rs.20 lakh in tax-free gratuity after the Centre decided to amend a law and bring them at par with central government staff. Currently, private sector employees can get tax exemption up to Rs.10 lakh in gratuity after five years of continuous employment.

A tripartite meeting between the labour ministry, trade unions and employee bodies decided on Thursday that a bill to amend the Payment of Gratuities Act will be brought in the second half of the Budget session of Parliament. The Left-affiliated labour unions also demanded that employees get gratuity after one year of service but no decision was taken. The move comes after the seventh pay commission’s recommendation allowing central government employees to earn tax-exempted gratuity up to Rs.20 lakh.

“It is a good move to bring the private sector at par with central government employees.” this move will also partly offset the impact of inflation,” said Rahul Garg, leader of direct taxes at PwC India.

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