Sunday, May 30, 2010

Gratuity Act 2010 wef 24.05.10 limit 10 lakh Notified


on Sunday, May 30, 2010

Date of enforcement of Payment of Gratuity (Amendment) Act, 2010

Notification No. S.O. 1217(E), dated 24-5-2010

In exercise of the powers conferred by sub-section (2) of Section 1 of The Payment of Gratuity (Amendment) Act, 2010 (15 of 2010), the Central Government hereby appoints the 24th day of May, 2010, as the date on which the said Act shall come into force.

Gratuity Amount payable under Payment of Gratuity Act enhanced from Rs.3.5 lakhs to Rs 10 lakhs

Payment of Gratuity (Amendment) Act, 2010 (No. 15 of 2010), dated 17-5-2010

An Act further to amend the Payment of Gratuity Act, 1972.

Be it enacted by Parliament in the Sixty-first Year of the Republic of India as follows:-

Short title and commencement.

(1) This Act may be called the Payment of Gratuity (Amendment) Act, 2010.
(2) It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint.
Amendment of section 4 of Act 39 of 1972.

2. In section 4 of the Payment of Gratuity Act, 1972, in sub-section (3), for the words “three lakhs and fifty thousand rupees”, the words “ten lakh rupees” shall be substituted.

Tax Liabilty on Gratuity

As per Income Tax act ,Section 10(10),employees has been divided in three categorise.

  1. Employee of Central/State Government and Local bodies :Gratuity received by these employees is fully exempted without any limit.
  2. Employee covered under Payment of Gratuity Act: Amount received as per Gratuity Act is fully exempted .Means Income Tax has not defined /set any Limit for such employees.Means as soon as the amount of Gratuity Act ,enhanced  ,Income tax Limit will also enhanced.As the income Tax act only refer the Payment of gratuity act .
  3. Other employee:For other remaining employee Limit is defined under the Income Tax act ,which is at present 3,50000.But many PSU ,which is not covered under the Sate or Central Govt definition as per sr number 1 and 2 above ,has started to pay ,gratuity as per Sixth pay commission ,maximum up to 10 lakh .So amount in excess of 3.5 lakh is taxable in hand of such employees .As the Limit is enhanced in Payment of Gratuity Act as per sr number 2 even then separate notification under this sub clause [10(10)(iii)} is required .The Limit is related to date of retirement /resignation and not to date of receipt.Update :Govt has enhanced the exemption limit for person retired after 24.05.2010 read more from here . .
Update 

Now PSU employees are getting Gratuity at 10 lakh Rs after tax deduction after Maximum cieling of 3.5 lakh .As the Limit of income tax exemption has been increased in case of Govt employee as well as for employees covered under payment of Gratuity act ,Limit for PSU employee should also be increased .I request to All PSU employees to raise their voice against this issue.

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  1. What is the fate of an employee who retired on 23rd may 2010.What was his fault to get such a low rate of Gratuity.Will it not be appropriate if the government announce that the former empoloyees are also eligible to get the enhanced gratuity amount proportionately based on Cost of living index announced by the government at the time of their retirement,keeping Rs.10 lakhs as the base.Why the government has chosen the 24th of May 2010 as the appropriate date or convenient.What logic lies behind such an announcement.

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