I am working in a private company and wish to know whether payment of Rs.10 lakhs as fixed by the Government for their employhees is also mandatory for employees of the private sector. If the answer is in the affirmative, please educate me with Government’s orders / gazette notification, etc.
You have got it all wrong.
As per the Gratuity Act, 1972, the gratuity amount is 15 days’ wages multiplied by the number of years put in by you. Here wage means your basic plus dearness allowance drawn by you last.
The formula for calculation of Gratuity has not changed. The tax free amount has been increased from Rs 3.5 L to Rs 10 L i.e Gratuity amount upto Rs 10 L will not be taxed.
HMT
You have got it all wrong.
As per the Gratuity Act, 1972, the gratuity amount is 15 days’ wages multiplied by the number of years put in by you. Here wage means your basic plus dearness allowance drawn by you last.
The formula for calculation of Gratuity has not changed. The tax free amount has been increased from Rs 3.5 L to Rs 10 L i.e Gratuity amount upto Rs 10 L will not be taxed.
HMT
References :
Sorry Dost, you have to wait for some more time for the proposed amendment to the Payment of Gratuity Act, 1972 to be introduced in Parliament during the current Budget session and passed. The Union Cabinet has approved raising the upper limit of Gratuity paid under the Act to Rs.10.00 lakh.
Calculation will be as per the existing formula.
Income Tax rebate up to Rs.10.00 lakh will automatically flow once the amendment is passed and the Gazette Notification issued because the existing provision provides rebate up to the upper limit in the Payment of Gratuity Act.
Will this be prospective or retrospective with effect from 1.1.2007 when the limit was raised for Central Govt employees is the question on a number of minds.
All the best
References :
‘The Hindu’ and other newspapers.