Tax-free gratuity limit doubled to Rs 20 lakh; PSU, private sector employees to be benefitted

Income Tax Exemption for Gratuity: Just before Lok Sabha elections this year, the government has given another gift to the middle class working category of the country. Union Finance Minister Arun Jaitley on Tuesday said that doubling of tax-free gratuity limit to Rs 20 lakh from Rs 10 lakh will be beneficial for public and private sector employees. The government in Budget 2019-20 also announced hiking of tax free gratuity to Rs 20 lakh for employees having service of more than five years. 

Finance Minister Arun Jaitley on his official Twitter handle, tweeted, "Income Tax Exemption for Gratuity under Section 10(10)(iii) of the Income Tax Act has been enhanced to Rs 20 lakh. Would benefit all PSU employees and other employees not covered by Payment of Gratuity Act.''

Tweet by Finance Minister Arun Jaitley

Income Tax Exemption for Gratuity under Section 10(10)(iii) of the Income Tax Act has been enhanced to Rs. 20 lakh. Would benefit all PSU employees and other employees not covered by Payment of Gratuity Act.

— Arun Jaitley (@arunjaitley) March 5, 2019

The move will benefit the Public Sector Unit employees, private sector employees in the nation as per Jaitley. The government had amended the section 10 (10) iii of the Income Tax Act in parliament last year. 

Parliament last year passed Payment of Gratuity (Amendment) Bill, 2018, enabling the government to change the existing Rs 10 lakh tax free gratuity limit to Rs 20 lakh.

A 100 per cent raise in the limit of tax-free gratuity to Rs 20 lakh and to fix the period of maternity leave qualifying as continuous service period through an executive order are added to the gifts before elections this year. 

Earlier, the government delighted the middle class by raising the income tax reabte in its interim budget 2019. Interim Finance Minister Piyush Goyal announced that taxable income up to Rs 5 lakh will get full tax rebate under section 87A of the Income Tax Act.