Government employees can get gratuity up to Rs 25 lakh
Tax-free gratuity limit for employees: The government has hiked the maximum amount of gratuity that a government employee can receive to Rs 25 lakh. The new limit is effective from January 1, 2024. However, not many are aware of the tax-exempt limit of gratuity for private sector and government employees.
Due to the hike in dearness allowance (DA) of central government employees to 50%, the gratuity limit for central government employees has increased to Rs 25 lakh from Rs 20 lakh previously. The new gratuity limit is effective from January 1, 2024. The announcement of the new gratuity limit was made in a circular issued by the Department of Pension & Pensioners Welfare under the Ministry of Personnel, Public Grievances and Pensions. The circular was issued on May 30, 2024.
According to the department's office memorandum, "Department of Expenditure vide their OM No. 1/1/2024-E-II(B) dated 12.03.2024 has issued instructions regarding enhancement of Dearness Allowance Rates from 46% to 50% of the Basic Pay with effect from 1st January, 2024. Accordingly, as per the government's decisions in implementation of the recommendations of the Seventh CPC, the maximum limit of Retirement Gratuity and Death Gratuity under the Central Civil Services (Pension) Rules, 2021, would be increased by 25% i.e., from Rs 20 lakh to Rs 25 lakh, with effect from 1st January 2024."
As per the 7th Central Pay Commission report, "The Commission notes that there is merit in the argument advanced to index the ceiling on gratuity so that the benefits of the enhanced ceiling are available to personnel in a manner which is more even over a time frame. The Commission recommends enhancement in the ceiling of gratuity from the existing Rs 10 lakh to Rs 20 lakh from 01.01.2016. The Commission further recommends, as has been done in the case of allowances that are partially indexed to Dearness Allowance, the ceiling on gratuity may increase by 25 percent whenever DA rises by 50 percent."
|