7th Pay Commission gratuity ceiling: Confused? Here is what was recommended for Central government employees and what Centre went on to accept

7th Pay Commission: Often, there are some things that are critical to a person's finances and yet they are not easily understood or are even misunderstood. Gratuity is one such issue, but it is quite simple really. Central government employees are entitled to gratuity as per the Seventh Pay Commission after being implemented by the Centre. 7th Pay Commission has been implemented at the central level and in fact, some of the governments have also implemented 7th CPC recommendations in their states as well. There are several recommendations from the 7th Pay Commission that the Centre has accepted like the hike in minimum salary and pension. Similarly, the panel recommended increasing the gratuity ceiling from Rs 10 lakh to Rs 20 lakh that the central government had no problem in accepting. Additionally, the 7th Pay Commission had recommended the central government to increase the ceiling on gratuity by 25 per cent whenever the Dearness Allowance (DA) rises by 50 per cent, which the Centre also accepted.

The 7th Pay Commission panel recommendations on gratuity ceiling and its indexation that central government accepted said, "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 the ceiling on gratuity may increase by 25 per cent whenever DA rises by 50 per cent."

Currently, central government workers with five or more years of service are eligible for tax-free gratuity after leaving the job or at time of superannuation under the Payment of Gratuity Act, 1972. The 1972 Act was enacted to provide for gratuity payment to employees engaged in factories, mines, oilfields, plantations, ports, railway companies, shops or other establishments.

For further information to the formal sector employees, the central government has amended the  Payment of Gratuity Bill in 2017 paving the way for doubling the limit of tax-free gratuity to Rs 20 lakh and empowering the government to fix the ceiling of the retirement benefit through an executive order. The Rajya Sabha passed the bill, which was approved by the Lok Sabha on March 15, 2018.