Workers eligible for interest on gratuity, rules Madurai Bench of HC

Workers eligible for interest on gratuity, rules Madurai Bench of HC

An employee becomes eligible for gratuity on the termination of his employment after he has rendered continuous service for not less than five years, according to Section 4(1) of the Payment of Gratuity Act, 1972.

He is also entitled for interest on the gratuity in terms of Section 7(3) and 7(3A). Making these clear, the Madurai Bench of the Madras High Court directed the Arumuganeri Salt Workers Co-operative Production and Sale Society Ltd, Thoothukkudi district, to pay the amount to its worker, Mr A. Rajan, within 30 days from date of receipt of a copy of this order without further driving him to any other forum.

Mr Justice K. Chandru, hearing a writ petition from the Society challenging the order dated January 27, 2009 of the Appellate Authority under the Act, Madurai (R-2), directing it to make interest payment if gratuity was not paid within 30 days from the date of his order, noted that from the beginning, it was the stand of the petitioner Society that R-1 (Mr A. Rajan) was not eligible for gratuity. If Sections 7(3) and 7(3A) were read together, then there was no difficulty in understanding the eligibility for receiving interest. In the present case, the Appellate Authority had correctly construed the legal provisions and there was no case made out to interfere with the interpretation placed by the Authority.

The petitioner contended that payment of interest would arise only when there was delayed payment, and in this case, there was no delay since they had paid gratuity as ordered by R-2, and hence the question of payment of interest would not arise. This Court was unable to accept the said statement, since the entire controversy was with regard to the legal provision.

Reading Section 4(1) of the Act it would be clear that the date relevant for determination of interest was the date on which gratuity became payable, which in the present case was when R-1 resigned his job on 1-6-2003. When R-1 issued notice for payment of gratuity, petitioner employer did not honour the notice. On the contrary, it was only when R-1 instituted a claim before the Controlling Authority, the petitioner contended about the irregular nature of his employment and his alleged disqualification from receiving gratuity.

In the light of these, the writ petition stood dismissed, the Judge held.

Source: The Hindu

Recovery of excess payment of Gratuity from Railway Pensiners (Voluntary Retired) - Clarification

RBE No. 95/2010
PC-VI No. 212

GOVERNMENT OF INDIA
MINISTRY OF RAILWAYS
(RAILWAY BOARD)

No. F(E)III/2008/PN1/13

New Delhi, dated: 06.07.2010.

The GMs/FA&CAOs,
All Indian Railways & Production Units.
(As per Mailing List)

      Subject: Grant of full pension to Government servants who retired on or after 01.01.2006 – recovery of excess payment of Retirement Gratuity from the employees who retired voluntarily after getting the benefit of adding years of service – Clarification reg.

*******

        The Department of Pension & Pensioners’ Welfare (DOP&PW) vide their O.M. No.38/37/08-P&PW(A) dated 10.12.2009, circulated vide this Ministry’s letter of even number dated 15.12.2009, have dispensed with the provision relating to linkage of full pension with 33 years of qualifying service, with effect from 01.01.2006 instead of 02.09.2008. These instructions, inter-alia, provide that the benefit of adding years of qualifying service for the purpose of computation of pension and gratuity shall stand withdrawn w.e.f. 01.01.2006. Simultaneously, para 4 of the said O.M. also provides that the overall calculation, may take into account revised gratuity and revised pension, including arrears up to the date of revision based on these instructions and that no recoveries would be made in the cases already settled

2.       In this connection, clarification has been sought from this office as to whether in the case of employees who retired voluntarily during the period from 01.01.2006 to 01.09.2008, after getting the benefit of adding years of service, the excess payment of gratuity is to be recovered or adjusted from the arrears of pension and commuted value of additional pension arising out of implementation of the instructions contained in DOP&PW’s O.M. dated 10.12.2009 ibid. The matter has, therefore, been examined by this Ministry in consultation with DOP&PW and it is clarified that the recovery of excess payment of gratuity on the above account, shall be regulated as under:

S.No	Point	Clarification
1	In cases where the employees , retired voluntarily after 1.1.2006 with pro-rata pension calculated for the qualifying service Less than 33 years, pension will under go upward revision and additional amount of pension will also be commutable	Excess payment of gratuity on account of withdrawal of weightage w.e.f. 01.01.2006 will be adjusted against arrears of pension (and not commuted value of pension). However, this adjustment will be restricted to the amount of arrears of pension. If the recovery of gratuity is more than the amount of arrears of pension, no recovery in excess of arrears of pension will be made.
2	In cases where employees retired voluntarily after 1.1.2006 after getting the benefit of adding years of qualifying service and were granted pension @ 50% of emoluments/average emoluments, as the case may be, due to their qualifying service having reached 33 years, there will be no revision in the amount of pension but the amount of retirement gratuity will undergo a change due to exclusion of the benefit of adding years of service, already extended to them.	Where there is no increase of pension, no recovery of gratuity will be made.

3.       All Zonal Railways etc., are, therefore, advised to settle the cases of the employees who retired voluntarily after 01.01.2006 but before 02.09.2008, in accordance with the above clarification.

(Sunil Bhardwaj)
Deputy Director Finance (Estt.)III,
Railway Board.

www.indianrailways.gov.in

Income Tax exemption limit for gratuity enhanced to Rs.10 lakh - Central Board of Direct Taxes approved

Income Tax exemption limit for gratuity enhanced to Rs.10 lakh - Central Board of Direct Taxes approved

The government enhanced the income tax exemption limit for gratuity from Rs.3.5 lakh to Rs.10 lakh w.e.f. May 24, 2010.

The Central Board of Direct Taxes has approved notification of ten lakh rupees as the maximum amount of gratuity entitled to exemption under sub-clause (iii) of clause (10) of section 10 of the Income Tax Act 1961.

The notification will be applicable to employees who retire, or become incapacitated before retirement, or expire, or whose services are terminated, on or after the 24th May 2010.

Exemption for gratuity: effective date of enhancement

Exemption for gratuity: effective date of enhancement

Payment of Gratuity Act has substituted Rs. 3.50 lakh to Rs. 10 lakh in Sec. 4 of that Act. When does it come into effect?

Payment of Gratuity (Amendment) Act, 2010, has been amended coming into force with effect from a date to be notified by the Central Government. The Amendment Act itself became law with effect from May 17, 2010. Notification No.S.O. 1217(E) dated May 24, 2010, appoints this date, that is May 24, 2010, as the date on which the Amendment Act comes into force. Only retirees on or after May 24, 2010, would have the benefit of higher ceiling of Rs. 10 lakh under Sec. 10(10)(ii) of the Act.

Sec. 10(10)(ii) of the Income-tax Act is applicable for those governed by the Payment of Gratuity Act. Exemption will be the amount vide sub-sections (2) and (3) of Sec. 4 of the Payment of Gratuity Act or the ceiling, whichever is lower. Government servants were already exempt under Sec. 10(10)(i) applicable to them up to Rs. 10 lakh, when the ceiling was raised for them from Rs. 3.50 lakh by a notification dated September 2, 2008, amending Rule 50 with retrospective effect from January 1, 2006. The delay of nearly three-and-half years as between Government servants and those covered by Payment of Gratuity Act for this ceiling is not justified because terminal benefits do not have the character of income and they are only deemed as income, subject to ceiling under Sec. 10(10) adopting what is given to the government servants as a benchmark of reasonable limit for exemption.

For others, relief would have to accord with the formula under Sec. 10(10)(iii), subject to the ceiling notified by the Central Government under this provision. The limit was raised for them to Rs. 3.50 lakh vide Notification No. 10772 dated January 20, 1999, with retrospective effect from September 24, 1997. Increase in limit for this class of persons is now awaited.

There is no justification for discrimination as between different classes of employees with reference to retirement date between government servants and others.

Since no guidelines as regards the choice of date for extending the ceiling are available in the statute, one would expect that the decision taken for government servants as regards tax treatment of retirement benefits should have been made applicable for others as well with effect from the same date.

S. RAJARATNAM

Source: The Hindu

Govt to raise gratuity ceiling for pvt sector employees

After bringing teachers under the Payment of Gratuity Act, the Government is now proposing to raise the ceiling for payment of gratuity to private sector employees from Rs 3.5 lakh to Rs 10 lakh.

A decision in this regard is likely to be taken at the next Cabinet meeting scheduled for January 9, sources in the Labour and Employment Ministry said. The Cabinet's nod will bring parity between Government and private sector employees in enjoying equal gratuity benefits. The Sixth Pay Commission recommendation had raised the limit for Central government employees.

The trade unions and other bodies had been pressing for raising the ceiling for private sector employees. In fact, some trade union bodies had insisted against fixing any upper ceiling but the Labour Ministry was of the view that this would put burden on the employers, sources said.

The Ministry had held consultations with various stakeholders about raising the ceiling, they said.

In the last Parliament session, the Centre had amended the Gratuity Act to clarify the definition of an employee. According to the new law, anybody who is earning a wage is characterised as an employee and is liable to receive gratuity.

National Aluminium Company became the first public sector undertaking to move its employees retirement funds to the New Pension System to contribute six per cent of the basic pay into the NPS.