7th Pay Commission: Based on the recommendations of the 7th Pay Commission, the limit of retirement gratuity and death gratuity under Central Civil Services (Pension) 2021 has been increased by 25 percent.
Central Government Employees Gratuity: The Dearness Allowance given to Central Government Employees has crossed 50 percent. Due to this increase in dearness allowance, the gratuity received by central employees on retirement from January 1, 2024 has become Rs 25 lakh, which was earlier Rs 20 lakh. Central employees do not have to pay any tax on gratuity of Rs 25 lakh received on retirement. It is completely tax-free. However, the tax-free gratuity limit for employees working in the private sector is only Rs 20 lakh.
Gratuity has become Rs 25 lakh
The Department of Pension and Pensioners Welfare, under the Ministry of Personnel, Public Grievances and Pensions, has issued an office memorandum, increasing the maximum limit of gratuity after the recommendations of the 7th Pay Commission after the dearness allowance of central government employees reached 50 percent. In this order, it was told that on the basis of the government’s decision to implement the recommendations of the Seventh Pay Commission, the maximum limit of retirement gratuity and death gratuity under the Central Civil Services (Pension) 2021 has been increased by 25 percent and it has been increased from Rs 20 lakh to Rs 25 lakh, which has come into effect from January 1, 2024.
What is gratuity?
Gratuity is the amount which is given to the employees as a mark of respect in lieu of the services rendered by them to their employer. This is given to the employee in lieu of long-term services rendered in his organization on his retirement or on leaving the company after a period i.e. 5 years. Gratuity is a component of the gross salary of any employee but it is not given regularly. Rather, a lump sum payment is made when the employee leaves the company.
This is how gratuity is calculated!
Gratuity is calculated on the basis of the salary received by the employee every month. To get gratuity, it is necessary for any employee to serve continuously for at least 5 years. However, this rule does not apply in case of death or disability of the employee. To calculate gratuity for a period of 5 years, 240 days in a year are counted as working days. Gratuity is given when any employee retires from service, becomes eligible for retirement, resigns after serving the same company continuously for 5 years, dies of an employee or becomes disabled due to illness or accident. Demand for change in gratuity calculation rules
Recently, representatives of trade unions have demanded changes in the gratuity calculation rules in the pre-budget meeting with Finance Minister Nirmala Sitharaman so that employees can get more gratuity on retirement. These organizations have demanded from the Finance Minister to increase the gratuity payment calculation from 15 days’ salary of the year to one month’s salary so that employees can get more gratuity on retirement.
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