The labour ministry said that the income tax exemption limit on gratuity has been doubled to Rs20 lakh from the existing Rs10 lakh, a move that will benefit employees who are not covered by the Payment of Gratuity Act, 1972.
"Ministry of Finance has enhanced the income tax exemption for gratuity under Section 10 (10) (iii) of the Income Tax Act, 1961 to Rs20 lakh," a labour ministry statement said.
Labour Minister Santosh Kumar Gangwar has said in the statement that this would benefit those employees of public sector undertakings (PSUs) and other employees not covered by the Payment of Gratuity Act, 1972, and has thanked Finance Minister Arun Jaitley for enhancing the exemption limit.
The ceiling of gratuity amount under the Payment of Gratuity Act, 1972, has been raised from time to time keeping in view overall economic condition and employers' capacity to pay and the salary of employees, which have been increased in private sector and in PSUs.
The latest enhancement of tax exemption limit on gratuity follows a government notification issued on March 29, 2018, under which the ceiling was increased from Rs10 lakh to Rs20 lakh effective March 29, 2018.